What is a Car Insurance Deductible?

Your car insurance deductible is a key part of your auto policy, but how do deductibles actually work? Your deductible can impact both your monthly premiums and your out-of-pocket payments if you get into an accident, so it’s important to understand the basics. 

This guide from Freeway Insurance explains how deductibles work, including when they apply, when you have to pay, and how they affect your costs. Read on to learn how to pick out the right deductible structure for your situation. 

How Does a Car Insurance Deductible Work? 

A car insurance deductible is the amount you will pay out of pocket on a claim before the insurance money kicks in. Deductibles work by “deducting” the amount you pay toward your coverage, then having the insurer cover the rest. For example, if your deductible is $500, you’ll have to pay $500 toward your damages before the insurance company starts paying for the rest. 

Insurers use deductibles to discourage unnecessary claims and offset their risk. As a result, auto deductibles have a direct relationship with your monthly premiums. 

If you want to pay less in the event of a claim, you’ll have to pay a higher monthly payment to offset the insurer’s costs. If you’re willing to take on more financial responsibility and pay a higher deductible, your premium will be lower. When considering your deductible vs. premium, it’s about balancing how much you can afford each month with how much you want to pay in the event of an accident. 

The difference in premiums for even a $500 vs $1,000 deductible can make a big difference over time. Similarly, paying an extra $500 every time you need to make a claim can add up. 

When Do You Pay a Deductible? 

You have to pay your car insurance deductible any time you file a claim with your auto insurance for collision, comprehensive, or uninsured motorist coverage. Deductibles apply to each claim, so if you have to make multiple claims, you’ll need to make a separate out-of-pocket payment each time. 

For example, if you wanted to make a claim after a hailstorm damaged your car, you would need to pay your comprehensive deductible. If you had to file another claim for repairs after an accident, you would need to pay your collision deductible. 

Do You Pay a Deductible for Liability Claims? 

You do not pay a deductible for liability claims. Your coverage automatically kicks in to cover the repair costs for the other party, up to your policy limits. 

Who Do You Pay the Deductible To? 

Typically, you pay the deductible to the mechanic or body shop repairing your car. If the other party was at fault in a collision, you might be reimbursed for this amount. 

Which Car Insurance Coverages Have Deductibles? 

Different coverages on your policy will have their own deductibles. Others, such as liability protection, don’t require any payment before your coverage kicks in. So, when do you pay a deductible? Here are the main types of coverage that require an out-of-pocket payment before you get additional support: 

Collision Coverage 

Your collision deductible applies when you get into a crash with a car or an object. Before your insurer will pay for the repairs to your vehicle, you’ll need to pay the collision deductible amount. If the other driver was at fault and had sufficient coverage, you’ll likely get reimbursed. 

Comprehensive Coverage 

You pay a comprehensive deductible if you need to file a claim for a non-collision situation, such as hail, theft, or vandalism. Typically, the comprehensive deductible is set a bit lower than the collision deductible. 

Uninsured Motorist Property Damage 

In some cases, you’ll have a separate deductible for dealing with uninsured motorists or hit-and-run accidents. If someone hits your car and doesn’t have liability protection, you can pay this out-of-pocket amount, and your insurer will handle the rest. 

Can You Change Your Deductible? 

Yes, you can change your deductible. It’s most convenient to make changes when you’re switching insurers or renewing your policy, but you can adjust your coverage at any time. 

Keep in mind that you can’t request a lower deductible after an incident and then immediately file a claim, as this would qualify as insurance fraud. Making standard adjustments based on your budget and preferences, however, is a smart way to get the most out of your insurance. 

Some insurers offer policy features with “disappearing” or “vanishing” deductibles. With these programs, your out-of-pocket payment decreases slowly over time if you don’t file a claim. They’re designed to reward safe drivers and pass additional savings onto you. 

Should I Choose a High or Low Deductible? 

A high deductible means a lower premium, while a low deductible means more out of your pocket for your premium. A $500 vs $1,000 deductible can make a big difference in your coverage and your monthly costs. There are pros and cons to both, so it’s important to consider your price range, risk tolerance, and coverage expectations when balancing your deductible vs. premium. 

High Insurance Deductible 

Choosing higher deductibles will help lower your monthly costs, but you will assume more financial risk. The lower premiums are great if you’re on a budget, but you would have to pay higher out‑of‑pocket costs for any repairs if an accident occurred. 

Let’s say you got into a car accident and it caused $5,000 worth of damage, and your deductible is $4,000. You would need to pay $4,000 to repair any of the damages before the insurance company covered your claim. After your costs, the insurance company would then pay the remaining $1,000 for repairs. 

Low Insurance Deductible 

With low deductibles, your monthly rates may be higher, but you can save money if you get into an accident. The main benefit is lower out‑of‑pocket costs if you need to file a claim. 

If you had a $500 collision deductible and were in a car accident that resulted in $5,000 worth of damage, you would only have to pay $500, and then the insurer would take on the remaining $4,500. 

Low deductibles are better if you’re more cautious and want extra protection from your insurer, while high deductibles are ideal for drivers on a budget who are willing to take on some added risk. When setting up your policy, consider your monthly budget, your likelihood of making a claim, and how much you can afford to pay if you get into a major accident. 

Does Insurance Pay Back Your Deductible? 

Insurance can pay back your deductible if you weren’t at fault in the accident and the insurer recoups the damages from the other party or their insurance. For standard comprehensive, uninsured motorist, or at-fault collision claims, however, you will not get your out-of-pocket payment back. 

What Is the Difference Between Deductible and Out of Pocket? 

Your deductible is a set amount that you and your insurance agency have agreed you will pay when you file a claim. So, unless you change it, your deductible will always be the same amount. Your out‑of‑pocket costs will vary depending on how much is left to pay after your insurance company has settled your claim. 

For example, if you cause an accident and you have $25,000 in bodily injury liability coverage and your deductible is $500, you will pay $500, and your insurance company will pay $24,500. If there are injuries beyond $25,000, you may be liable for those costs out of pocket. 

Looking for Low‑Cost Auto Insurance Online Today? 

Understanding how deductibles work is essential if you want to get the most out of your auto coverage. Whether you want to decrease your monthly costs or get a bit of extra peace of mind, adjusting this one aspect of your coverage can make a big difference. 

If you’re looking to save money on your car insurance, you’ve come to the right place. Freeway Insurance can help you find a low‑cost auto insurance policy that fits your needs and budget. Request a free auto insurance quote online or over the phone at 800‑777‑5620 or stop by one of our locations. 

FAQs 

Do You Always Have To Pay a Deductible After an Accident? 

No, you don’t always have to pay a deductible after an accident. For example, liability coverage doesn’t use deductibles. You primarily have to pay if you were at fault and want to make repairs on your own vehicle. 

Do You Pay a Deductible If the Accident Was Not Your Fault? 

Yes, you usually have to pay your deductible up front for collision coverage, even if you weren’t at fault. It can take some time for your insurance to process the claim and recover the funds from the at-fault party. If they succeed, you may be reimbursed; if the driver doesn’t have insurance, however, you might not get your money back. 

Can You Avoid Paying a Deductible? 

You can sometimes avoid paying a deductible by opting for add-on coverage or signing up for a disappearing deductible plan. If you weren’t at fault, you may also be able to get the other party’s insurer to pay your repair costs directly, avoiding any up-front payments. However, this can be a time-consuming process with no guaranteed results. 

Does Liability Insurance Have a Deductible? 

No, liability coverage does not have a deductible. Your insurer will pay for the other party’s damages up to your policy limits. 

What Happens If Repair Costs Are Less Than Your Deductible? 

If your repair costs are less than your deductible, you shouldn’t file a claim with your insurer. You won’t get any coverage, but having the claim on your history could lead to price hikes, so it’s best to handle small issues independently. 

Can You Have Different Deductibles for Collision and Comprehensive? 

Yes, you can have separate deductibles for collision and comprehensive. For example, you might want a lower deductible for comprehensive to ensure you can get coverage for hail damage, and a higher collision deductible due to an accident being unlikely.