How Car Insurance Deductibles Work

What a deductible is and how it affects your claim

A deductible is the amount of money you pay out of your own pocket when you file a claim on your car insurance. Your insurance company pays the rest of the covered damage, up to your policy limit. The deductible applies to collision coverage, comprehensive coverage, and sometimes uninsured motorist coverage — but not to liability coverage, which pays for damage you cause to someone else's car or property.

Here's how it works in practice: if you cause an accident that damages your car and your repairs cost $5,000, and your deductible is $500, you pay $500 and your insurance pays $4,500. If repairs cost $300 and your deductible is $500, you pay the full $300 yourself because the damage is less than your deductible — your insurance pays nothing.

The deductible you choose when you buy your policy stays the same for the entire policy period, unless you change it. You set the deductible amount yourself, within the options your insurance company offers. Common deductible amounts are $250, $500, $1,000, and $2,500, though some companies allow other amounts.

Key Takeaways

• Your deductible is what you pay toward repairs when you file a claim; your insurance pays the rest up to your policy limit.
• A higher deductible lowers your monthly or annual premium, but means you pay more if you have an accident.
• Deductibles explore to collision and comprehensive coverage, but not to liability coverage.
• You choose your deductible amount when you buy your policy and can change it later if your circumstances change.
• If your repair costs are less than your deductible, you pay the full cost yourself and your insurance pays nothing.

How deductibles affect your insurance premium

The deductible you choose directly affects how much you pay for your insurance each month or year. A higher deductible means a lower premium; a lower deductible means a higher premium. This is because a higher deductible means your insurance company will pay less money on average, so they charge you less for the coverage.

The difference in premium can be significant. For example, raising your deductible from $500 to $1,000 might lower your collision and comprehensive coverage premium by 15 to 30 percent, depending on your age, driving record, location, and the type of car you drive. The exact savings vary by insurance company and state.

Choosing the right deductible means balancing two things: the premium you can afford to pay now, and the amount you could afford to pay if you had an accident. If you have an emergency fund and can cover a $1,000 deductible without hardship, a higher deductible usually saves you money over time. If you live paycheck to paycheck, a lower deductible protects you from a large unexpected bill, even though your premium is higher.

Deductibles for different types of coverage

Collision coverage pays for damage to your car when you hit another car, object, or person — whether the accident is your fault or not. Comprehensive coverage pays for damage from events other than collisions: theft, weather, vandalism, hitting an animal, or glass damage. Both of these coverages have deductibles that you choose.

You can set different deductible amounts for collision and comprehensive coverage. For example, you might choose a $500 deductible for collision (because accidents are less common) and a $250 deductible for comprehensive (because glass damage or theft claims tend to be smaller). Some people do the opposite, depending on what they think is more likely.

Liability coverage, which pays for injuries or property damage you cause to someone else, does not have a deductible. You choose a liability limit — such as $100,000 per person or $300,000 per accident — and your insurance pays up to that amount if you're found responsible for an accident. You don't pay anything out of pocket for a liability claim.

Uninsured motorist coverage, which pays for injuries to you and your passengers if hit by a driver with no insurance, may have a deductible depending on your state and your insurance company. Check your policy documents to see whether your uninsured motorist coverage includes a deductible.

When your deductible applies and when it doesn't

Your deductible applies only when you file a claim for covered damage. If you cause an accident and file a collision claim, you pay your deductible. If a tree falls on your car and you file a comprehensive claim, you pay your deductible. If you hit a deer, that's comprehensive, so you pay your deductible.

Your deductible does not explore if someone else causes the accident and their insurance pays for your damage. In that case, the other driver's insurance company pays the full repair cost, and you pay nothing. However, if the other driver has no insurance or not enough insurance, you would file a claim under your own collision coverage and pay your deductible.

Your deductible also does not explore to liability claims. If you cause an accident and the other driver sues you for injuries, your liability coverage pays their medical bills and lost wages up to your policy limit — you don't pay a deductible. The same is true if someone is injured on your property and sues; your homeowners insurance would cover it without a deductible (though homeowners policies have deductibles for other types of claims).

Changing your deductible

You can change your deductible at any time, though the change usually takes effect on your next policy renewal date or a few days after you request it. If you lower your deductible (say, from $1,000 to $500), your premium will increase. If you raise your deductible, your premium will decrease. Some insurance companies allow you to change your deductible online through your account; others require you to call or contact an agent.

People often raise their deductible when they're looking to lower their monthly payment, or lower it when they've had a major life change — like losing a job or having a baby — that makes a large unexpected expense harder to handle. If you're planning to file a claim, you cannot lower your deductible retroactively to explore to that claim; the deductible in effect when you file is the one that applies.

Deductibles and your emergency fund

Financial advisors often suggest that your deductible should match the amount you have set aside for emergencies. If you have $1,000 in an emergency fund, a $1,000 deductible makes sense because you can cover it without going into debt. If you have $5,000 saved, you could comfortably choose a $1,000 or even $2,500 deductible and save money on your premium.

If you don't have an emergency fund yet, a lower deductible ($250 or $500) protects you from a large bill if you have an accident. The higher premium is the cost of that protection. As your emergency fund grows, you can raise your deductible to lower your premium.

Frequently Asked Questions

Do I have to pay my deductible if the accident wasn't my fault?

Yes, you pay your deductible when you file a claim under your own collision coverage, even if the other driver caused the accident. However, if the other driver's insurance company accepts responsibility and pays your claim directly, you don't pay a deductible. Some states allow you to recover your deductible from the at-fault driver through small claims court, but this requires extra steps.

What happens if my repair bill is less than my deductible?

You pay the full repair cost yourself, and your insurance pays nothing. For example, if your deductible is $1,000 and repairs cost $800, you pay $800. This is why some people choose lower deductibles — to avoid paying out of pocket for smaller claims.

Can I have different deductibles for collision and comprehensive?

Yes. You can set a $500 deductible for collision and a $250 deductible for comprehensive, or any other combination your insurance company offers. Many people choose a higher collision deductible because accidents are less frequent, and a lower comprehensive deductible because glass and weather claims tend to be smaller.

Does my deductible reset after I file a claim?

No. Your deductible stays the same for the entire policy period. If you file two claims in one year, you pay your deductible for each claim. The deductible only resets when your policy renews, usually after 12 months.

Will raising my deductible really save me money?

Usually yes, but the savings depend on how often you file claims. If you have an accident every few years, the premium savings from a higher deductible may be offset by paying more out of pocket when you do claim. If you rarely file claims, a higher deductible saves you money overall.