Auto Insurance Deductibles Simplified

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Simply put, a deductible is an amount you agree to pay when you file a claim on your auto insurance. That amount is usually somewhere between $250 and $2,000, but it may be higher or lower depending on what you’ve agreed to with your insurer.

For example, if you’re in an accident that causes $2,000 worth of damage to your car and your deductible is $500, you’ll make a claim to the collision portion of your policy. Then, either you or the mechanic who’s fixing the car will receive a check for $1,500. Your deductible, $500, is what you’ll owe the mechanic to complete the transaction.

You won’t have to deal with deductibles at all until you have an accident. It’s not an annual cost or something that comes out of your premium payment. If you’re in an accident caused by another driver who is insured, you may not even have to pay the deductible. 

What is a car insurance deductible?

The deductible is money out of your pocket you’ll need to pay in situations involving damage to your car. You agree to this amount when you purchase the policy, and it stays in force unless you change it.

Deductibles generally range from $250 to $2,000, with $500 and $1,000 deductibles being the most popular. When you choose your deductible, the first thing to be aware of is that the higher your deductible, the lower your monthly premium cost will be. This is because your insurer knows that if you have a higher deductible, they’ll have to pay out less if a claim is made on the policy.

So, for example, let’s say you have a $250 deductible and you’re paying $300 in premium costs every six months. Increasing to a $1,000 deductible might decrease your six-month premium to $162, and a $2,000 premium could decrease your six month cost to $135. Your results will vary, but when you are shopping for car insurance, it makes sense to ask for quotes with different deductibles to see how much you’d save as long as you’d feel comfortable paying the deductible.

How do deductibles work?

Not all types of car insurance have deductibles applied to them. Almost all states have a required minimum amount of liability insurance you need to carry to drive legally in that state. That liability coverage will pay for damage to the other car in an accident or for the medical costs of those in the other car if there are injuries. This liability insurance does not have a deductible.

Other types of insurance that you can choose to add to your policy do have deductibles. These types include:

  • Collision, which pays for damage to your car in an accident.
  • Comprehensive, which covers you for non-accident-caused damage, such as falling trees or theft.
  • Personal injury protection and medical payments, which will pay hospital and other bills if you or your passengers are hurt in an accident.
  • Uninsured and underinsured motorist coverage, which kicks in if the other driver is one of the 13 percent of Americans who drive illegally without insurance.

How does a deductible affect your insurance premium?

As we’ve noted, there is a direct relationship between your deductible and your premium. As your deductible goes up, your premium comes down. But does that mean you always want to go for the highest premium possible? Not necessarily. Compare the chart below from Progressive to get an idea of how the deductible influences the premium.

DeductibleSix-month costCost difference
$250$300-29 percent lower
$500$225-25 percent lower
$1,000$162-28 percent lower
$2,000$135-17 percent lower

As the shows, your six-month cost decreases significantly as you increase your deductible. So, for example, switching from a $100 to a $250 deductible saves you $120, or $20 a month. If you were to put that savings aside, you’d have $240 in a year, which would almost cover the increased deductible if you had an accident. 

But if you did an even more dramatic shift, from $100 to $2,000 for your deductible, you’d be saving $285 every six months, or $570 a year. That would not make up for the increased $2,000 deductible if you were involved in an accident. 

In the end, if you choose a high auto insurance deductible, you are saving money each month, but you’re taking a chance that you won’t have an accident during that time that would require you to pay your deductible. If you were to have an accident, you’d need to have the deductible amount saved from another source, rather than from premium savings. 

Choosing what deductible is right for you

Choosing the right deductible is a personal decision based on your financial situation and more. Ask yourself the following questions to help you decide:

  • What does my emergency fund look like? It’s great to save money on your premiums, but if a $1,000 deductible would be impossible for you to manage, you should choose a lower one. If you can have that $1,000 set aside in an interest-bearing savings account, go for a higher deductible to save money each month.
  • How much is my vehicle worth? If you’re driving an older car that has less value, it doesn’t make sense to carry a high auto insurance deductible because the car may not be worth as much as it would cost to have it repaired.
  • Am I a good driver? You take a risk every time you get behind the wheel, even if you are a good driver because bad weather or a mediocre driver in another car might cause an accident. Still, if you know you are a safe driver and less likely to get in an accident, you may never need to use your deductible. In that case, it could be logical to have a high one and lower monthly premiums.
  • Do I have any young drivers on my policy? If you have teen drivers on your policy, it’s worth noting that motor vehicle crashes are the leading cause of death for teens in the U.S., and they have more accidents than any other age group. The more likely it is that your car will be involved in an accident, the more you’ll want to consider a lower deductible so you’ll be paying less if something happens.
  • Am I truly saving money? As you could see in our example above, the biggest savings were the result of moving from a low deductible to a slightly higher one. Once you reach a deductible of $1,000 or so, going higher doesn’t net you enough in premium savings to make it worthwhile.

How to avoid paying car insurance deductibles

There are a few cases where there is no deductible taken into account. If you are not at fault in an accident and you do not live in a no-fault state, you should not have to pay a deductible for damage to your car. In that case, the other car’s driver would pay for your repairs through their policy. 

However, if they are uninsured or underinsured, your own uninsured/underinsured motorist coverage would kick in, and your insurer may charge you a deductible. If you are in a no-fault state, each driver would pay for repairs from their own insurance, and there would be a deductible for each of them, regardless of who is at fault. 

Either way, if you are in a single-car accident — say, your car slides on some ice and runs into a fence — you’ll be on the hook for your deductible. The same is true if you need to tap into your comprehensive insurance, which covers vandalism, theft, falling objects and hitting an animal. 

Other than not being the cause of an accident, there aren’t really any good ways to avoid paying your deductible where it’s required. This is why it’s important to pick out a deductible that is something you can reasonably expect to afford. You’re taking a huge risk if you don’t have money stashed away for use as a deductible and you choose one that’s too high for you to manage, just so that you can have the lowest possible premiums.

The takeaway

Choosing the right deductible is a personal choice that can save you money.

  • Deductibles are what you pay before your insurance kicks in after an accident.
  • Higher deductibles mean lower premiums.
  • It’s best to have your deductible amount saved before you have an accident.
  • There are few ways to avoid paying a deductible.

Your deductible is the amount you need to pay before your insurance kicks in after an accident or mishap that damages your car or causes injuries. Most kinds of coverage other than liability require a deductible to be paid. If you’re trying to save money, a higher deductible will make for smaller premium payments, but that could cause problems if you have an accident and haven’t saved enough to pay the deductible. 

In the end, choosing a deductible is a decision that should be based on your financial situation, your driving abilities and the value of your car, among other factors. Choosing the right deductible is an act of balancing your tolerance for risk with your interest in saving money.

Mary Van Keuren

After 30 years as a writer and editor in academia, Mary now writes full-time for the insurance and finance industries. Her work has appeared on, and, as well as other consumer-focused websites.

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