What is a car insurance deductible?
A car insurance deductible is the amount you have to pay when you file an insurance claim with your carrier.
For instance, if a tree falls on your car, causing $1,000 in damage, you don't get a $1,000 check from your insurer. You get $1,000 minus your deductible. If your policy has a $250 deductible, your insurer pays you $750. If your deductible is $500, you should receive a payment of $500. And if your deductible is $1,000, you get nothing, which means it's not worth filing a claim.
You choose your deductible amount when you buy an auto insurance policy, but you can change it at any time.
High deductible vs. low deductible auto insurance
When selecting your deductible, consider the following factors:
- What can you afford to pay if your car is damaged? If you have one car and you need it to commute to work, you probably don't want a deductible that exceeds your savings.
- A low deductible may not benefit you, because filing a claim for a low amount could raise your future premiums by more than you may collect. In reality, you would probably avoid filing a claim for damages unless they significantly exceed your deductible. For example, if your deductible is $1,000 and your damages are $1,200, you'd probably absorb the $200 and not risk a rate increase.
- How much can you save by raising your deductible, and how many years would it take for the premium savings to offset the extra cost if you file a claim?
Keep in mind that adjusting your deductible amount is just one way to get cheap car insurance. If you're looking to get lower rates, you should look at all of the ways you can save.
How much can you save by raising your auto insurance deductible?
According to the Insurance Information Institute, increasing your deductible from $200 to $500 can make you eligible for a 15 to 30% premium discount, while raising the deductible to $1,000 can save you up to 40%. However, this varies widely depending on the state in which you live, the cost of your coverage after taking any other discounts, your driving record and your car's cost to repair or replace.
The chart below shows sample quotes from six insurers for a female California driver with a clean record and liability coverage limits of $100,000 per person, $300,000 per accident and $50,000 for property damage, plus uninsured motorist coverage in the same amounts. Companies differ in the discount amounts given for higher deductibles.
Insurance premiums at different deductible amounts
| Company | $250 deductible | $500 deductible | $1,000 deductible | Difference between $1,000 and $250 ded. | Premium savings % | Break-even (years) |
|---|---|---|---|---|---|---|
A | $1,332 | $1,260 | $1,176 | $156 | 12% | 4.8 |
B | $1,308 | $1,116 | $1,044 | $264 | 20% | 2.8 |
C | $996 | $960 | $924 | $72 | 7% | 10.4 |
D | $1,284 | $1,224 | $1,176 | $108 | 8% | 6.9 |
E | $1,680 | $1,596 | $1,512 | $168 | 10% | 4.5 |
F | $2,400 | $1,932 | $1,680 | $720 | 30% | 1.0 |
Look carefully and you'll notice that the higher discount percentages don't necessarily indicate the lowest premiums. When insurers use terms such as "up to 40%," it may or may not indicate the best deal. Company F's impressive 30% discount looks a lot less enticing when you see the base premium they're starting with.
A car insurance rate comparison tool can help you easily evaluate quotes from competing insurers and show you the best deal at whatever deductible you choose.
Car insurance deductibles and claim costs
If you raise your deductible from $250 to $1,000 and save $150 per year on your auto insurance premium, it could take you five years for the lower premiums to offset the deductible. However, that's not the only factor to consider. Filing a single claim can cause your premium to increase.
Using the same hypothetical California woman, here are sample rates when the driver had a single car accident causing damages in amounts ranging from $1,000 to over $10,000. Of the six insurers quoted, only two charged a higher rate if the driver had a claim -- that's the good news. However, that increase went into effect whether the claim was $1,000 or $10,000, indicating that filing a smaller claim may well cost more than it pays.
Premiums charged after first claims at varying amounts
| Company | No claims | $1,000 claim | $3,000 claim | $5,000 claim | $10,000+ claim |
|---|---|---|---|---|---|
A | $1,260 | $1,260 | $1,260 | $1,260 | $1,260 |
B | $1,116 | $1,116 | $1,116 | $1,116 | $1,116 |
C | $960 | $960 | $1,248 | $1,248 | $1,248 |
D | $1,224 | $1,224 | $1,224 | $1,224 | $1,224 |
E | $1,596 | $1,596 | $1,596 | $1,596 | $1,596 |
F | $1,932 | $3,036 | $3,036 | $3,036 | $3,036 |
How do car insurance deductibles work?
Auto insurance deductibles don't come into play if another driver's insurer is responsible for covering your damages. You will pay your deductible when you file a claim either for collision or comprehensive coverage.
After you have filed the claim, your insurance company will investigate and estimate the cost of the repairs. From there, one of two things will happen:
- Your car will be repaired, with the insurance company issuing a check for the repair cost, minus your deductible. The check may go to you or to the repair company.
- Your car will be declared a total loss, meaning it will cost more to repair than it's worth, and you'll be issued a check for the car's actual cash value minus your deductible.
If the car is being repaired, you'll need to pay the deductible amount to the repair shop for the work to be completed.
What if you can't pay your auto insurance deductible?
If you can't pay your deductible, you have a few options:
- Delaying repairs. You may be able to put off the repair until you have the money if you have alternate transportation or your car is safe to drive. Keep in mind, though, that you still need to report the claim immediately for your insurer to pay it.
- Shop for lower-cost repairs. If the check is made out to you, try searching for a few more estimates to see if you can find a cheaper repair cost. Some shops will "waive" the deductible, which means they'll perform the work for less than the estimated cost or the adjuster's numbers.
- Search for a car insurance deductible payment plan. Ask your preferred shop about a car insurance deductible payment plan, allowing you to pay your part of the bill over time. You'll probably have to pay interest, but your car can be repaired promptly.
Car insurance deductible amounts are a personal consideration. The right one for you depends on your driving record, location, financial position, insurer and other factors. Compare quotes from multiple insurance companies at multiple deductible levels to find the best price with a deductible you can afford.
