First, an auto insurance deductible is what you pay “out of pocket” on a claim before your insurance covers the rest. Collision, comprehensive, uninsured motorist, and personal injury protection coverages all typically have a car insurance deductible.
In this guide, we discuss: Auto Insurance Deductibles Explained, how to avoid paying car insurance deductible, what is a good deductible for car insurance, and do you have to pay your deductible if youre not at fault.
When you have an accident and your car gets damaged, you may wonder what happens to the money you pay as a part of your insurance premium. Insurance companies use it to pay for things like medical bills, lost wages, and other expenses associated with the accident.
But there’s one more thing they use it for: To pay for your deductible! A deductible is what you pay “out of pocket” on a claim before your insurance covers the rest. Collision, comprehensive, uninsured motorist, and personal injury protection coverages all typically have a car insurance deductible. You typically have a choice between a low and high deductible. A low deductible means a higher insurance rate, whereas a high deductible means a lower insurance rate.
Auto Insurance Deductibles Explained
How do car insurance deductibles work?
There are no annual deductibles for motor insurance, in contrast to health insurance. Every time you submit a claim, you are accountable for the deductible specified in your policy. Your insurance company will pay the balance of the repair or replacement costs for your car after you pay the car deductible.
A covered accident costs you $3,000 in damages with a $500 deductible. Your $500 share of the cost of the car repair will be covered by your insurance, which will pay $2,500.
The two most popular auto insurance policies that involve deductibles are comprehensive and collision. In some areas, you might additionally have a deductible for uninsured/underinsured motorist property damage or personal injury protection. For all types of coverage, auto insurance deductibles function exactly the same.
What if my car insurance deductible costs more than my repairs?
If the cost of the damage to your car exceeds your auto insurance deductible, you will be responsible for paying the full cost out of pocket because the insurer only pays for losses that exceed your deductible. In such circumstances, you might not need to submit a claim.
Your deductible is $1,000, yet the cost of your car repairs is only $800. Because the cost of the repairs is less than your deductible, you will be responsible for paying for them altogether.
High vs. low car insurance deductibles
You typically have a choice between paying a greater or smaller deductible for your auto insurance. The typical range of auto insurance deductibles is $100 to $2,000 There is no wrong choice; the $500 deductible is the most popular one among our drivers. In the end, it comes down to personal preference:
Higher deductibles result in cheaper vehicle insurance rates and more out-of-pocket expenses, whereas lower deductibles result in higher rates and reduced out-of-pocket expenses.
Make sure you can afford to pay your auto deductible out of pocket in the event of a claim before choosing a deductible level. Additionally, it’s critical to take into account your driving history and chances of making a claim. Because you’re wagering against getting into an accident, you might choose a higher deductible for your auto insurance, but if you’ve previously been in accidents and frequently travel on busy roads, you might be more likely to submit a claim and pay a deductible.
You might want to pick a low auto insurance deductible for windshield replacements if you reside in a state where cracked windshields are frequent. You can have no deductible on glass replacement coverage or the choice of a $0 deductible, which will raise insurance rate, depending on your state and insurer.
How will your car insurance deductible impact your rate?
The figure below illustrates how modifying a deductible can alter the cost of coverage based on paying $420 for collision coverage on a six-month policy. The highest increase in savings comes from raising your deductible from $100 to $250, while the smallest increase comes from raising it from $1,000 to $2,000 in coverage.
The premium amounts are fictitious. The premium adjustment resulting from deductible amount adjustments reflects Progressive’s direct auto Ohio rate filing as of August 2019. View the picture of this table.
When do you pay a car insurance deductible?
You pay your deductible any time you file a claim under a coverage that carries a deductible, assuming the damage is covered and costs more than your deductible amount. If your claim is approved, your deductible will typically be applied when your insurance company issues your payout. You generally don’t have to write a check or make a payment to your insurer. They simply subtract your deductible amount from your claim’s approved payout. Suppose you have a claim approved for $5,000, and your deductible is $250. In that case, your insurance company will issue you a check for $4,750.
Do I pay a deductible if I hit a car?
You won’t have to pay a deductible if you cause an accident but your automobile sustains no damage. In this case, your liability insurance would cover the other driver’s medical expenses and any property damage, with no deductible. You would have to pay your collision deductible if, however, the accident caused damage to your car and you choose to make a collision claim.
Do I pay a car insurance deductible if I’m not at fault?
If you make a claim for repairs and the other motorist is found to be at fault, their insurance company will pay for them and you won’t be responsible for your deductible. If you have collision insurance, another option is to go through your own insurer, who will contact the other driver’s insurance provider to request payment (including your deductible). You might have to pay the whole or portion of your auto insurance deductible in circumstances when fault is shared.
Remember that in some areas, your uninsured/underinsured motorist property damage coverage may have a deductible if you are struck by an uninsured or underinsured driver.
how to avoid paying car insurance deductible
If you are having trouble paying your car insurance deductible after an accident, what do you do? You likely need your car repaired as quickly as possible so you can get back to work and life. You might be wondering how to avoid paying car insurance deductible when you can’t afford it.
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The best thing to do is to prevent this situation from ever happening. You should adjust your deductible until you can afford it so you’ll have the money to cover it. But if it’s too late, and you need to pay a deductible you currently can’t afford, you do have options.
What Is a Car Insurance Deductible?
According to Progressive, a .css-xtkis1{-webkit-text-decoration:underline;text-decoration:underline;text-decoration-thickness:0.0625rem;text-decoration-color:inherit;text-underline-offset:0.25rem;color:#1C5f8B;-webkit-transition:all 0.3s ease-in-out;transition:all 0.3s ease-in-out;font-weight:bold;}.css-xtkis1:hover{color:#000000;text-decoration-color:border-link-body-hover;}car insurance deductible is the amount of money you have to pay before your insurance company will cover the rest of the costs. For example, if you require $4000 to repair your car after an accident and you have a $500 deductible, then you will pay $500 before your insurance company will pay the remaining $3500.
Having a lower deductible usually means you pay higher premiums each month and vice versa—having a higher deductible generally decreases your monthly premium costs.
Sometimes you find yourself in a situation where you cannot afford your deductible. In this article, we explore everything you need to know if you get yourself caught in a situation where you cannot afford your deductible.
How Can I Avoid Paying a Car Insurance Deductible?
To get your insurance claim money, you will need to pay your deductible. If you don’t have the money right now, you might choose to not make a claim. For example, if your car is functional after an accident and merely has cosmetic damage, you might take your time to file a claim. That way, you can save up the deductible money before you make a claim. Here are your options when you cannot afford your deductible:
Check Your Policy
It is always important to know the details of your policy when it comes to deductibles. According to AutoInsuranceQuote, some insurance companies do not require you to pay your deductible up front. These companies are willing to subtract your deductible straight from your claim money.
For example, if your claim is valued at $10,000 and your deductible is $500, your auto insurance company will write you a check for $9500. That is the amount of your claim minus your deductible.
In this case, you will not need to pay your deductible before having any repairs done. If you are uncertain about your policy, ask your insurance agent if you are required to pay your deductible up front.
Talk With Your Mechanic
In some rare cases, says Car Insurance Comparison, a mechanic might be willing to waive your deductible completely. Though it is unlikely, it is worth asking your mechanic if this is an option. This practice is not illegal, so you should not feel uncomfortable asking. The mechanic could be making so much money off the repairs that the shop is willing to waive the deductible or let you make payments over a longer period. For example, you could work out an agreement where you pay your deductible off in monthly installments.
In this situation, the mechanic would charge the insurance company for the cost of the repairs, subtracting the deductible. The body shop would then allow you to make payments to cover the remaining part of the bill or waive your deductible in full. The mechanic basically covers the deductible for you, and then you pay the shop back.
However, if you don’t make the payments to cover the rest of your deductible, the mechanic has the legal right to possess your vehicle until you pay it off.
Keep in mind, it is illegal for your mechanic to overcharge your insurance company in an attempt to recoup a waived deductible. That would be considered insurance fraud, according to AutoInsuranceQuote. It is also illegal for the mechanic to use aftermarket parts while charging the insurance company for company direct parts to avoid paying the deductible. Asking a mechanic to do this for you could land you in jail, causing you to lose far more than money and a car.
Get a Loan
Lastly, you can choose to get a loan such as a payday loan to cover the deductible, says Car Insurance Comparison. Though the interest rates can be very high, payday loans do not require a credit check, and you can get money within 24 hours.
You’ll be able to pay off your deductible and get the repairs finished. Then, take the time to save up money and pay off your loan.
In Conclusion: Lower Your Deductible
Your insurance won’t be very helpful if you cannot pay for your deductible. Ideally, says The Balance, your deductible should be an amount you can easily pay out of pocket when an accident happens. That amount will vary based on your budget and how much cash you have available at any given time.
If your deductible is too high, and you cannot afford it, you can adjust your deductible by paying higher premiums each month. Paying more each month might seem inconvenient, but it can save you a lot of trouble if you get into an accident. You need to be strategic about your deductible and choose the right amount for your situation. Otherwise, your claim will not be processed, and you won’t be able to get your car fixed in a timely manner. Not having a car can leave you in a bad financial situation if, for example, you cannot get to work without your car.
what is a good deductible for car insurance
Choosing the best car insurance deductible isn’t easy. However, selecting a deductible is one of the most important things to consider when comparing coverage.
A high-deductible car insurance policy brings different financial consequences than a policy with a low deductible.
Read on to learn more about how car insurance deductibles work and how you can decide which amount is right for you.
What is a Car Insurance Deductible?
If you file a car insurance claim after an incident, the deductible is the amount you pay out of pocket before your insurance carrier starts paying for repairs. You will have to pay the deductible each time you file a claim.
For example, if you have a $3,000 repair and a $1,000 car insurance deductible, you would be responsible for paying $1,000. After paying the deductible, the insurance company would pay the remaining $2,000. However, if the repair costs less than the deductible, you’ll pay the entire bill.
Not all types of insurance coverage have a deductible attached to them. In general, deductibles apply to collision, comprehensive, uninsured/underinsured motorist, and personal injury protection.
How Does a Deductible Work?
You get to choose your deductible when you buy your policy. Policies with lower deductibles have higher premiums but lower out-of-pocket costs if you file a claim. And policies with higher deductibles have lower premiums but higher out-of-pocket costs if you file a claim.
When you file a claim with the insurance company, you pay the deductible. The carrier covers costs that exceed the deductible amount.
Average Cost of a Car Insurance Deductible
Auto insurance deductibles can range anywhere from a few hundred dollars to $2,500. However, the most popular option is $500. No matter what amount you choose, it’s important that you can afford to pay it if you need to file a claim.
6 Steps to Choosing a Deductible
When selecting a car insurance deductible, follow these six steps to find out which amount is best for you.
1. Choose a High or Low Deductible
There is a fairly straightforward relationship between your insurance deductible and the rate you pay for your policy. Plans with lower deductibles usually have higher monthly premiums and vice versa. But if you choose a plan with a higher deductible to get a lower rate, you’ll pay more out of pocket if you file a claim.
2. Calculate the Cost Difference
When comparing auto insurance policies, looking at the difference in price between plans with high and low deductibles is a good place to start. But your total cost will vary based on whether you file a claim. So, it’s a good idea to run a few different calculations and compare your out-of-pocket expenses if you file no claims, one claim, or two claims.
In the hypothetical scenario below, the driver would save $1,116 per year if they had a high-deductible policy and didn’t file any claims. But if the driver filed two claims that year, a low-deductible plan would save them $384 in out-of-pocket costs.
3. Are You Likely to File a Claim?
In general, drivers who are more likely to file an auto insurance claim will have lower total costs with a low-deductible car insurance plan. Conversely, drivers who don’t file a claim will typically save with a higher deductible plan. However, when you opt for a plan with a higher deductible, you’re betting that you won’t have an accident.
When considering the likelihood of filing a claim, ask yourself if you have a history of car accidents or engage in high-risk driving behaviors such as speeding or rush-hour driving.
4. Determine the Value of Your Car
Depending on where you live, most insurance companies will only pay up to the actual cash value of your vehicle if the insurer declares it a total loss. So, it’s generally better to have a lower deductible if your car’s not worth much.
For example, let’s say your vehicle’s worth $1,500 and you have a $1,000 deductible on your insurance policy. If your car is totaled, the insurer will only pay $500 after you cover the deductible.
On the flip side, if your car’s worth $10,000 and you have a $1,000 deductible, the insurance company will pay $9,000. So, having a higher deductible makes more sense.
You will need to calculate how much your car is worth. Then compare its value to your insurance policy costs. And remember, you don’t have to choose the same deductible for every type of coverage you have. An insurance agent may be able to help you mix and match deductible amounts based on your car’s value and the risks you face.
5. Evaluate Your Cash Savings
If you do get into a car accident, you’ll have to pay your deductible before the insurance company starts chipping in for repairs.
If you don’t have savings or an emergency fund to cover a high deductible, it may be better to choose a low-deductible policy. The higher monthly bills for insurance premiums may be a better way to protect your finances if you have an accident.
6. What’s Your Tolerance for Risk?
Choosing a high-deductible plan is a gamble that you won’t have a car accident. If you do have an accident with a high-deductible policy, you’re still covered. But you’ll pay more out of pocket after the accident than if you had a low-deductible policy.
do you have to pay your deductible if youre not at fault
Cell phone down, two hands on the wheel and your full attention on what’s ahead — you do everything you can to stay safe on the road. But no matter how safe of a driver you strive to be, you’re still vulnerable to not at fault accidents caused by other drivers.
Dealing with a car accident can be stressful and time-consuming — especially when it’s an accident that’s not your fault! That’s why American Family Insurance makes it a priority to help you get things back to normal as quickly and smoothly as possible.
We’ve highlighted some key information about who pays your deductible after an accident that isn’t your fault. We’ll highlight the deductible recovery process, too, so you know exactly how your insurance will work to get you reimbursed.
How Do Car Insurance Deductibles Work?
Let’s start with the basics — what’s a car insurance deductible? A car insurance deductible is the amount of money you agree to pay out of pocket when you file an insurance claim. Once you pay this amount, your insurance company will then step in to help cover the remaining cost for damages (up to your policy limit).
A deductible is commonly required with collision coverage, which is coverage that would protect you in an accident that’s not your fault. You’d also pay a deductible with comprehensive coverage and sometimes with uninsured or underinsured coverage.
Do I Pay My Deductible If I’m Not At Fault?
The short answer? Maybe. You can choose to wait until the at-fault driver’s insurance company connects with you and pays for your damages, but that method is rarely swift. Your other option, if you want to get the process rolling so you’re back on the road quicker, is to file a claim with your insurance company, pay your deductible and have them cover the remaining costs for damages.
But it doesn’t seem fair to have to pay for an accident that wasn’t your fault, right? That’s where deductible recovery and subrogation comes into play.
What Is Deductible Recovery?
With deductible recovery, American Family will work through a process called subrogation. Subrogation is the insurance world’s way of saying, “we’re working on getting your deductible back because the accident wasn’t your fault.”
Basically, subrogation is when one insurer (e.g. American Family) receives money from another insurer (e.g. the at-fault driver’s insurance company) so that the not-at-fault driver gets their deductible back.
Here’s how subrogation works in car insurance:
Your insurance company will pay for your damages, minus your deductible. Don’t worry — if the claim is settled and it’s determined you weren’t at fault for the accident, you’ll get your deductible back.
The involved insurance companies determine who’s at fault. Sure, you know the answer to this, but it’s all part of the process. You might be asked for a statement about the accident, so having the police report, pictures and/or other important details will be helpful.
Your insurance company recovers your deductible. After determining the other driver was indeed at fault, your insurance company will work through the subrogation process to recover your deductible. You may need to submit proof that you paid your deductible, which could be a body shop invoice or credit card statement.