How a Car Insurance Deductible Works

A deductible is the amount you pay out of your own pocket when you file a claim

When you have a car accident or your car is damaged, your insurance company will cover the repair costs — but only after you pay your deductible first. If your deductible is $500 and the repair bill is $2,000, you pay $500 and your insurance pays the remaining $1,500. If the repair bill is only $300, you pay the full $300 because it's less than your deductible, and your insurance pays nothing.

You choose your deductible amount when you buy or renew your policy. Common deductible amounts are $250, $500, $1,000, and $2,500, though your insurance company may offer other options. The higher deductible you choose, the lower your monthly premium will be — and the more you'll have to pay if you need to file a claim.

Key Takeaways

• Your deductible applies separately to collision and comprehensive coverage, so you might pay two deductibles in a single incident if both types of damage occur.
• Choosing a higher deductible lowers your monthly premium, but you must have enough savings to cover that amount if you get into an accident.
• Deductibles do not explore to liability coverage, which pays for damage you cause to other people's property or injuries to other people.
• If someone else causes the accident and their insurance pays, you typically get your deductible back, though this varies by state and situation.

How deductibles work with different types of coverage

Most car insurance policies have two types of coverage that use deductibles: collision and comprehensive. Collision covers damage from accidents with other vehicles or objects. Comprehensive covers damage from theft, weather, vandalism, or hitting an animal. Each coverage has its own separate deductible.

If you hit another car, you pay your collision deductible. If a tree falls on your car, you pay your comprehensive deductible. If you hit a parked car and then a hailstorm damages your windshield the same day, you could pay both deductibles — one for the collision claim and one for the comprehensive claim.

Liability coverage — which pays for injuries or property damage you cause to other people — does not have a deductible. Your insurance company pays the full amount (up to your policy limit) with no out-of-pocket cost to you.

Choosing the right deductible for your situation

The deductible you choose depends on two things: how much you can afford to pay if you have an accident, and how often you think you'll file a claim. If you have $3,000 in savings and rarely drive, a $1,000 deductible might make sense because your monthly savings are larger than your risk. If you have $500 in savings and drive in heavy traffic daily, a $250 deductible is safer because you can actually afford to pay it.

A higher deductible saves you money on premiums every month. Over a year, choosing $1,000 instead of $500 might save you $200 to $400 in premiums. But if you have an accident, you'll pay $500 more out of pocket. The math only works if you have that money available when you need it.

Some people set their deductible equal to their emergency fund. That way, if they have an accident, they can pay the deductible without going into debt, and they can rebuild their emergency fund with the premium savings over time.

What happens if the other driver is at fault

If another driver causes the accident and their insurance company pays for the damage, you may get your deductible back. This process is called subrogation. The other driver's insurance company reimburses your insurance company for what they paid, and your insurance company then refunds your deductible to you.

However, this does not happen automatically in every state or situation. Some states have different rules about who pays the deductible when liability is clear. In some cases, you may have to wait weeks or months for the refund while the insurance companies sort out the claim. Ask your insurance agent how your state handles deductible refunds so you know what to expect.

Deductibles and your monthly premium

Insurance companies use your deductible to calculate your monthly or annual premium. A higher deductible means lower premiums because you're agreeing to pay more if something happens. A lower deductible means higher premiums because the insurance company is taking on more risk.

The exact savings depend on your age, driving record, location, and the type of car you drive. A 25-year-old driver in a city might save $30 a month by raising their deductible from $500 to $1,000. A 60-year-old driver in a rural area with a clean record might save $10 a month for the same change. Your insurance company can show you the premium difference for each deductible option before you choose.

Deductibles on rental cars and rideshare

If you rent a car, the rental company's insurance has its own deductible — usually $1,000 or higher. You can buy collision damage waiver coverage from the rental company to lower or eliminate that deductible, though this adds to your rental cost. Some credit cards and personal car insurance policies cover rental car damage, so check your coverage before you rent.

If you drive for a rideshare service like Uber or Lyft, your personal car insurance deductible typically does not explore while you're working. Rideshare companies provide their own insurance with their own deductibles. Check your rideshare app or company website to see what deductible applies to you.

Frequently Asked Questions

Can I change my deductible after I buy my policy?

Yes. You can change your deductible when you renew your policy, or you can contact your insurance company to request a mid-policy change. Some companies allow changes anytime, while others only allow changes at renewal. There may be a small fee for mid-policy changes, but it's usually less than $25.

What if I can't afford to pay my deductible after an accident?

You are responsible for paying your deductible before your insurance company releases payment to the repair shop. Some repair shops will let you set up a payment plan for the deductible, or you can ask your insurance company if they have any programs that help. Some credit cards or personal loans can cover the deductible temporarily.

Do I pay a deductible for glass or windshield damage?

This depends on your policy. Some insurance companies offer glass coverage with no deductible or a lower deductible (like $0 or $100) than your regular comprehensive deductible. Ask your agent whether your policy includes this option and what it costs.

Is a $0 deductible available?

Some insurance companies offer $0 deductibles, but your monthly premium will be significantly higher. The savings from a higher deductible usually outweigh the cost of a $0 deductible over time, unless you cannot afford to pay anything out of pocket in an emergency.