What is a car insurance deductible and how does it work?
A car insurance deductible is the dollar amount that you are required to pay before your insurance will cover the remaining cost of repairs or damages. You can set your deductible to as low as $250, but it affects car insurance rates. The lower your deductible is, the higher your rates will be. You can shop online to see what deductible and coverage makes sense for you.
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UPDATED: Dec 28, 2021
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- Drivers must pay their deductibles first before the rest of their coverage kicks in
- Deductibles can be set at different amounts
- There are only two deductibles, one is for collision, and the other is for comprehensive
You’ve been in an accident, but thankfully, you have an active car insurance policy with full coverage. You call your car insurance company to file a claim, but a car insurance deductible must be paid before you can access the rest of your coverage.
You discover that after paying a monthly rate, you still need to pay extra just to access your coverage.
This step in the claim filing process can leave drivers frustrated and irritated, but deductibles play an important role in your insurance. Knowing how your insurance works and how each part can benefit you is important.
After reading this, you’ll be able to see how a car insurance deductible affects car insurance quotes. Next time someone asks, “What does deductible mean in car insurance? What even is my deductible?” you’ll be able to tell them exactly what they need to know.
If you want a new car insurance deductible, enter your ZIP code to get free quotes from companies near you.
What is a deductible in car insurance?
Like your medical insurance deductible, a car insurance deductible is the dollar amount that you are required to pay before your insurance is able to cover the remaining cost.
You will only have two deductibles to pay:
- Your comprehensive deductible
- Your collision deductible
The question that is on a lot of drivers’ minds is, “How does a car insurance deductible work?”
Let’s say you were out for a drive and were caught in a hail storm. After conversing with a mechanic, you’re told that it will be $2,000 to bump out the dents on your roof. Your comprehensive deductible is set at $250.
That means that you’ll have to pay $250 out of pocket, but your insurance company will pay the remaining $1,750.
Now, if you caused an accident, and your car suffered damage as well, you would have to first pay your collision deductible before your insurance coverage would kick in to cover the rest of the cost.
Be aware that your car insurance deductible affects car insurance rates. The higher your deductible, the lower your rates will be; however, it’s important to have an affordable car insurance deductible. You don’t want to break the bank just by paying your insurance deductible.
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When do you pay the deductible for car insurance?
You will pay your deductibles when you go to make a claim. If you were driving and had caused an accident, you would have to pay your collision deductible first before your insurance coverage would kick in.
Now, if the other driver caused the accident, you wouldn’t have to pay anything. You would simply exchange insurance information. Then you would call the other driver’s insurance company to file a claim with them.
Now, some drivers may be wondering, “Should I report a minor accident to my insurance company?” If, for example, you backed into an object that only caused damage to your vehicle and the cost to repair said damage was lower than your deductibles, then you wouldn’t need to report it.
Remember, reporting unnecessary claims can increase your insurance rates.
How can insurance rates stay low?
If you don’t want to pay an arm and a leg for your car insurance deductible, a car insurance company will provide you with other means to keep your rates at a reasonable level. You can keep your deductibles at a reasonable level while maintaining great rates by utilizing discounts.
Below is a list of discounts offered by some major insurance companies:
Car Insurance Discounts By Company
|Auto Insurance Discounts||Allstate (%)||American Family (%)||Farmers (%)||GEICO (%)||Liberty Mutual (%)||Nationwide (%)||Progressive (%)||State Farm (%)||Travelers (%)||USAA (%)|
|Adaptive Cruise Control||N/A||N/A||N/A||N/A||5||✗||✗||N/A||N/A||N/A|
|Daytime Running Lights||✗||✗||✗||1||5||5||✗||N/A||✗||✗|
|Electronic Stability Control||✗||✗||✗||N/A||5||✗||✗||N/A||N/A||N/A|
|Forward Collision Warning||N/A||N/A||N/A||N/A||5||✗||✗||N/A||N/A||N/A|
|Lane Departure Warning||N/A||N/A||N/A||N/A||✗||✗||✗||N/A||N/A||N/A|
|New Customer/New Plan||N/A||N/A||N/A||N/A||✗||N/A||N/A||N/A||N/A||N/A|
|Seat Belt Use||N/A||N/A||N/A||15||N/A||N/A||N/A||N/A||N/A||N/A|
|Students & Alumni||N/A||✗||N/A||✗||10||7||N/A||N/A||N/A||N/A|
You can use these discounts to keep your rates from emptying out your wallet every month instead of dreading your deductible if you ever had to file a claim.
The Insurance Deductible Explained
Your insurance deductible helps keep your rates low, but you will need to be prepared to pay your deductible if you are in a collision or have experienced a comprehensive loss.
If you don’t want a high car insurance deductible, buy car insurance from an insurance company that offers low rates. While a high car insurance deductible keeps car insurance rates low, you shouldn’t set your deductibles at an incredibly high level that is beyond your means to pay.
Instead, make sure that you are taking advantage of every insurance discount that you can to keep your rates low.
Now that you’re up-to-date on the insurance deductible meaning, enter your ZIP code to get free quotes and see how you can score great rates and a low car insurance deductible.