What Is a Car Insurance Deductible and How Does It Work?

A car insurance deductible is the amount a policyholder is responsible for paying when making a claim with their car insurer after a covered incident. This has to occur before insurance pays the costs of damages. For example, if a car incurs $5,000 worth of damage in a covered accident and the driver has a $1,000 deductible, they would pay $1,000 of the repair costs and the insurer would pay $4,000. 

Key takeaways:

• A car insurance deductible is the amount a motorist is responsible for paying when they make an insurance claim 
• People can choose their deductible when they buy insurance coverage
• The higher the deductible, the lower the auto insurance premiums -- and vice versa 

How does a car insurance deductible work?

When someone gets into an accident or something happens with their car, a car insurance deductible is the amount the driver must pay out of their own pocket. Deductibles can apply to specific types of coverage including:

• Collision coverage, which pays out if someone damages their own vehicle in a crash.
• Comprehensive coverage, which pays if something else goes wrong, such as a car theft or tree falling on the policyholder's vehicle.
• Uninsured/underinsured coverage, which pays if the policyholder iss hit by an at-fault driver who has too little auto insurance to cover the losses.

Personal injury protection, which is required in certain states and pays for lost wages and medical bills regardless of who caused the collision.

When you shop for a policy from insurance providers, you'll select the deductible amount. A higher deductible will result in lower premiums but out-of-pocket costs are higher. Increasing the deductible from $100 to $250 might cause premiums to decline by close to 30%. But if someone sustains $1,000 of damage, their insurance company covers $800 of their losses with a $200 deductible instead of $900 with a $100 deductible.

When do you pay your car insurance deductible?

When a motorist makes an insurance claim for a covered incident, they first pay the deductible. Then the insurance company would pay out the remaining funds necessary to fix the vehicle damage. The policyholder pays their car insurance deductible if:

• An incident covered by their car insurance causes losses 
• The coverage that applies has a deductible

For example, comprehensive and collision coverage policies almost always have a deductible. If a driver hits a deer and damages their own car, collision coverage would pay for losses. The motorist would simply pay their deductible. 

When you don't have to pay a car insurance deductible

There are certain situations when people don't have to pay a car insurance deductible.

If another driver causes a crash and their insurance pays 

In most states, a driver who is responsible for causing a crash is obligated to pay for all damages associated with the collision. For example, if Driver A is at fault for an accident that damaged Driver B's car, Driver A's insurance should fully pay for Driver B's repairs. Driver B shouldn't owe a deductible. 

Sometimes, however, the driver who should cover the costs has no insurance or too little coverage. If that's the case, another motorist may need to make a claim under their uninsured or underinsured motorist coverage.  A deductible may apply in this situation. 

If you cause someone else damage and your insurer pays them 

When a driver damages someone else's vehicle or causes injury, their liability insurance coverage pays their costs. A deductible will not apply in these circumstances. 

However, if someone's own vehicle is also damaged in the same incident and they want to make a claim for repairs under their collision coverage, their deductible will apply. 

If the specific type of damage doesn't require paying a deductible 

In some cases, certain losses are covered without a deductible. For example, some insurers will pay for repairs to windshield glass without requiring the car owner to pay a deductible first. 

If someone opted for no deductible when buying coverage 

Insurers may allow people to opt for coverage with a $0 deductible. If someone has no deductible, they won't owe anything out of pocket when a covered incident occurs. Remember, though, the price of car insurance will be higher if someone chose a no-deductible policy.

Choose a car insurance deductible for each type of coverage

People choose a car insurance deductible individually for different kinds of insurance coverage. Typically, drivers need to select a deductible for comprehensive coverage, collision coverage, and personal injury protection.

What's the average car insurance deductible?

The average car insurance deductible is $500. But people can choose a deductible amount anywhere from $0 to $2,000 with most insurers.

How much of a deductible should I select for my car insurance?

The goal when getting an auto insurance quote is to get quality and affordable insurance. To do that, motorists need to carefully evaluate the tradeoffs between low-deductible, high-premium policies and high-deductible, low-premium coverage. Here are some key considerations. 

Risk tolerance

When choosing a policy with a higher deductible, people take a bigger risk. They're gambling that they won't need to make a claim and pay out-of-pocket expenses. Those who aren't comfortable taking that chance may want to pay higher premiums to pass more of the risk of financial loss on to their insurance provider.

Emergency savings

Drivers don't want to be unable to cover the deductible if an accident occurs. Those who tend to have little cash saved for unexpected expenses may want to choose a lower deductible. People with a hefty emergency fund can probably afford to take a chance of incurring higher out-of-pocket costs if they make an insurance claim.

The likelihood of a claim

The more likely it is someone will make a claim, the lower they should set their deductible. If someone has a new driver on their policy or lives in an area where accidents are especially common, they'd be better off paying higher premiums for more protection. 

But if the chances of a covered incident are unlikely, a driver may be better off keeping their premiums low. Some people could save around $220 annually on comprehensive and collision coverage by switching from a policy with a $50 deductible to one with a $250 deductible. By putting the premium savings into a bank account, a person could have enough money in around a year to cover the added deductible amount. They could then continue benefiting from the premium savings. As long as a driver doesn't get into an accident in less than a year, they'd be better off. 

The value of the vehicle

If a vehicle isn't worth much, it may not pay to have coverage with a high deductible. 

Say a motorist opts for collision coverage with a $1,000 deductible and their vehicle is only worth $1,000. The insurance provider would pay nothing in case of a total loss, which occurs when a vehicle is damaged beyond repair and needs to be replaced. In this case, the driver would be better off forgoing collision coverage entirely.

How to avoid paying a car insurance deductible

The best way to avoid paying a car insurance deductible is to avoid accidents, theft, or damage. Practice defensive driving, follow the rules of the road, obey the speed limit, and avoid driving in bad weather. Keep vehicles garaged in a safe location, and consider installing anti-theft devices. 

People can also choose a policy with no deductible, albeit at a higher cost. Or they can sign up for a vanishing or disappearing deductible with insurers who offer it. This will reduce the amount of the deductible by a set amount during each time period the driver is free of accidents. Many insurers do set a minimum deductible, but people can reduce their potential out-of-pocket costs substantially over time.