What is an auto insurance deductible and how does it work?

Auto insurance deductibles range from $100 to $2,000. However, most auto insurance companies recommend deductibles from $500 to $1,000. If you want to pay less for car insurance, you should choose a higher deductible.

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Chris Tepedino is a feature writer that has written extensively about auto insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and Cinncinati.com. ...

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Reviewed by Rachael Brennan
Licensed Insurance Agent Rachael Brennan

UPDATED: Apr 11, 2022

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Can't-Miss Facts

  • Changing auto insurance deductibles can lower monthly rates
  • A $2,000 deductible can generate auto insurance rates that are 68% cheaper than average
  • Several coverage options have auto insurance deductibles attached to them, and some lenders have auto insurance deductible requirements

Did you know adjusting insurance deductibles can lower your car insurance rates?

But how does a car insurance deductible work? And what does “deductible” mean in car insurance terms? Don’t worry — we’re here to answer your questions.

Our guide explains how to get more affordable auto insurance rates with deductibles and the difference between comprehensive and collision deductibles.

Read on to learn all about auto insurance deductibles.

What is an auto insurance deductible, and how does it work?

The insurance deductible is universal, but it works a little differently in various insurance industries. So what is a deductible in car insurance?

Deductibles are the amount you pay before an auto insurance claim is resolved. Most car insurance companies want you to pay deductibles before moving a claim forward.

For example, if you’re at fault in an accident, your insurance company may request that you file a claim and pay the deductible before sending a check to the body shop.

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When do you pay the deductible for auto insurance?

You should pay the deductible after you’ve filed a claim. This ensures that the claim payout gets to you or the repair shop sooner rather than later.

Which auto insurance coverage types have deductibles?

Some basic coverage options have deductibles attached to them. Here are four coverages that have deductibles.

  • Collision coverage
  • Comprehensive coverage
  • Uninsured/underinsured motorist (UM/UIM) coverage
  • Personal injury protection (PIP) in rare situations

Collision insurance pays for damage regardless of fault in a car accident, and comprehensive insurance covers damage from unforeseen events like storms, vandalism, and flooding.

Most deductibles are $500, but you can raise or lower deductibles at any time.

UM/UIM coverage is attached to liability insurance in some states, but sometimes it carries a deductible since it covers the policyholder.

PIP focuses on expenses related to personal injuries, such as lost wages, child care expenses, legal fees, etc. Deductibles are rare but may apply.

What auto insurance coverages don’t have a deductible?

Bodily injury and property damage liability don’t have deductibles attached to them. These coverages pay for injuries and damage to another driver.

Medical payments (MedPay) coverage doesn’t usually have a deductible, either.

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Do I have to pay a deductible if I’m not at fault?

No, you don’t. When another driver is at fault in an accident, the at-fault driver’s insurance coverage pays for your injuries and property damage. One exception to this rule is a hit-and-run where the other driver can’t be located.

Can changing my deductible lower my auto insurance rates?

Yes, it can. Higher car insurance deductibles can produce cheaper rates per month.

But what about lower deductibles? Let’s look at how deductibles affect the national average for full coverage auto insurance.

Average Monthly Auto Insurance Rates by Deductibles
DeductiblesAverage Monthly Auto Insurance Rates
$100$432
$250$335
$500$268
$1,000$193
$2,000$160
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Low auto insurance deductibles generate more expensive rates, while high deductibles give you access to cheap auto insurance.

Although affordable car insurance sounds excellent, it could be an issue when you have to pay a deductible to start a claim. Deductibles worth $1,000 or more can be problematic.

How can I pay for an expensive deductible?

One way to be prepared to pay your deductible is to keep money in a savings account in case you need to pay a deductible.

You can also reduce a costly deductible costs with a vanishing deductible.

A vanishing deductible (also called a diminishing deductible) provides credit toward your deductible when you don’t have any accidents during your policy. 

Some auto insurance companies provide $100 off your deductible each year that you don’t have a claim.

Some insurance companies have a deductible account. This allows you to deposit money in an account with your car insurance company that will go toward a deductible if you get in an accident.

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What other factors should you consider when choosing a deductible?

Here are three things you should consider about deductibles.

  • Deductibles can pay off minor car repairs
  • Your deductible is an out-of-pocket expense
  • Lenders may have deductible requirements

A deductible can go toward the cost of repairs. For example, if you have repairs that cost $475, a $500 deductible can cover the cost of damage.

Auto Insurance Deductible: The Bottom Line

Your insurance deductible is how much you need to pay before a claim moves forward. A few car insurance companies allow you to use your claim payout to pay deductibles but don’t count on this.

If you’re considering out-of-pocket expenses, you can get a lower deductible. However, your monthly rates will be more expensive.

You can avoid high prices when you compare auto insurance at various companies.

Frequently Asked Questions: Auto Insurance Deductible

Do you want to know more about car insurance deductibles? Read these answers to frequently asked questions to learn more.

#1 – Is it better to have a $500 deductible or $1,000?

It depends on your situation. A $500 deductible can save you out-of-pocket expenses, but your rates are higher. Meanwhile, $1,000 produces cheaper rates but expensive out-of-pocket costs.

#2 – What is a good deductible for auto insurance?

A good deductible is from $500 to $1,000.

#3 – Is a $100 deductible good?

It’s good for drivers who’ve been in an accident and want to minimize sudden costs, but it generates more expensive car insurance rates.

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