Const & Coverage
We make it easy to compare and buy insurance.LEARN MORE
What is a deductible and what does it mean for you?
When it comes to car insurance, a deductible is the amount you’d have to pay out of pocket after a covered loss before your insurance coverage kicks in. Car insurance deductibles work differently than medical insurance deductibles — with car insurance, not all types of coverage require a deductible. Liability insurance doesn’t require a deductible, but comprehensive and collision coverage usually do.
When you’re adding that coverage to your car insurance policy, you’ll usually have the chance to decide where you want to set the deductible.
Typically, the higher you set your deductible, the lower your monthly insurance premiums will be — but you don’t want to set it so high that you wouldn’t be able to actually pay that amount if needed. Here’s a quick primer how car insurance deductibles actually work, and how to decide what your deductible should be.
A deductible is the amount of money you have to pay out of pocket before your car insurance will cover the rest. For example, if you backed your car into a telephone pole, your collision insurance would pay for the cost of the damage. But let’s say your collision coverage had a deductible of $500. If the total cost of repairs comes to $1800, your insurance will only pay for $1300.
You can find your deductible amounts is listed on your declarations page.
Having to pay a deductible means you can do a sort of cost-benefit analysis before you make a claim with your insurer. If you’ve been in a small accident in which you were the only driver involved, it will make sense to pay out of pocket if the cost to repair the damage is less than or equal to your deductible.
Learn more about deciding when to file a claim on damage and when to pay out of pocket.
Not all types of car insurance coverage require a deductible. Liability insurance, which covers the costs if you damage someone’s property or injure someone with your car, never requires a deductible.
Liability coverage is the backbone of most car insurance policies, and in most states in the U.S., you’re required by law to have it.
Other types of insurance coverage, like personal injury protection (PIP), which helps cover medical bills for you and your passengers and is required in some states, can have a deductible depending on where you live.
So can uninsured/underinsured motorist property damage coverage, which covers damage to your vehicle if you’re in an accident caused by a driver who doesn’t have insurance, or whose insurance can’t cover the full amount of damage they caused.
But comprehensive and collision insurance nearly always require a deductible, usually of $500 or $1,000. Comprehensive coverage covers damage to your vehicle that happens when it’s not being driven, like damage from fire, falling objects, vandalism and extreme weather, as well as collision with an animal. Collision insurance covers damage to your car from an accident, no matter who was at fault.
Both collision and comp coverage usually require that you pay an out-of-pocket deductible — but you choose the amount, and where you set your deductible will have an affect on your monthly insurance premium.
Home & Auto Insurance Comparison Made Easy
People save 20% on average by bundling homeowners & auto insurance.
Generally, the higher you set your deductible, the lower your monthly premiums. That’s because you’re assuming more of the cost, rather than putting it on your insurer. The opposite is also true, choosing a low deductible means you’ll have to pay a higher premium.
You may be tempted to choose a high deductible in order to get a lower insurance premium, but remember, there’s a very real possibility you’ll have to pay that deductible someday. When choosing a deductible, make sure it’s an amount you’d actually have on hand if you needed to pay it.
A Policygenius expert can help you find auto insurance coverage that fits your needs and your budgets, while weighing the cost of any deductibles.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
Security you can trust
Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
Copyright Policygenius © 2014-2019