Car Insurance Deductibles Explained
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A car insurance deductible is the amount you are responsible for before your auto insurance coverage kicks in.
Deductibles in car insurance can apply to different coverage types, including collision, comprehensive, underinsured and uninsured motorist coverage.
Raising your deductible will almost certainly lower your car insurance premium, but be prepared to pay the higher amount in the event of a claim.
Chances are you’ve had to deal with a deductible at some point. It may have been related to a medical bill, a home repair or a car accident. But because insurance works differently in each situation, you can’t always apply the rules for one kind of deductible to other insurance types.
Let’s look specifically at how a car insurance deductible works and what you need to know, before you have to deal with repairs after an accident.
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What is a car insurance deductible?
A car insurance deductible is the amount of money you’ll have to pay toward a claim before your insurance pays anything.
Some types of coverage, like comprehensive or collision insurance, often include deductibles. However, these two types of coverage are usually optional. They aren’t legally required to drive in any state, but you may need them on your policy if you are financing or leasing a vehicle.
Liability insurance, which is required to drive legally in most states, typically does not have a deductible.
You may be able to choose different deductible amounts for different types of coverage. For example, it’s possible to have a $500 deductible for comprehensive coverage but a $1,000 deductible for collision coverage, or vice versa.
How does a car insurance deductible work?
Let's say you have a $500 collision insurance deductible and submit a $3,000 claim for car repairs after an accident you caused. You will have to pay your $500 deductible upfront, but once you pay that amount, your provider covers the rest of the $2,500 claim.
The good news is that you may be able to raise or lower your car insurance deductibles. In most situations, a higher deductible means you'll have a lower premium for your policy, while choosing a lower deductible means you'll pay more for your premium.
It all comes down to what works best for you: Pay more out of pocket after an accident but have a cheaper premium, or pay less out of pocket but have a more expensive premium.
Either way, you'll have to pay your deductible when you submit a claim. The benefit of adjusting your car insurance deductibles is that you can decide how much you'll pay for the coverage you need.
When do I have to pay an auto insurance deductible?
This is one of those “sometimes but not always” answers that can make insurance tricky. But the easiest way to remember is that if your policy includes a type of insurance that has a deductible, you will have to pay that deductible every time you file a claim that uses that specific coverage type.
Comprehensive and collision coverage
Most insurance providers require deductibles for comprehensive and collision coverage because they cover damage to your vehicle in a wide variety of situations.
Collision coverage pays for repairing your vehicle even if you cause the accident, which would not be covered by your liability coverage. Meanwhile, comprehensive coverage deals with damage from a non-accident event, like a tornado, hitting a deer or even vandalism.
Uninsured and underinsured motorist coverage
Uninsured motorist coverage often includes a deductible, as well. This type of insurance pays for expenses resulting from an accident caused by another driver without insurance. Similarly, underinsured motorist coverage covers expenses that cost more than the other driver’s insurance coverage limits.
Personal injury protection
Personal injury protection insurance, also known as PIP, typically covers your medical expenses and other costs due to a car accident, regardless of who’s at fault. Depending on your state, this coverage type may include a deductible.
There may be a situation where the cost of repairs is less than your car insurance deductible. In these cases, you wouldn’t want to file a claim because your insurance premium could increase even if you weren’t at fault for the accident.
» MORE: Types of car insurance
What is a good deductible for car insurance?
There isn’t really such a thing as a good or bad deductible because every driver’s situation is different. A more beneficial question might be: How much could you afford to pay out of pocket if you caused an accident?
Your deductible determines how much you are responsible for paying before your insurance pays out. So in some cases, it may be easier to handle a slightly higher premium each month than to come up with a $1,000 deductible after an accident.
However, let’s say you want extra coverage for your car, so you sign up for comprehensive insurance. The average auto insurance deductible is $500, but you could also select amounts like $250, $1,000 or $2,000; this will also affect your policy’s premium.
Choosing a higher deductible to get a lower premium may seem like an easy way to pay less for car insurance, but it’s not always the best decision. Just because you’re a careful driver doesn’t mean you’re accident-proof — they are called “accidents,” after all. And if you aren’t able to pay your deductible and make the necessary repairs, you could find yourself facing financial or even legal trouble.
You’ll pay your deductible every time you file a claim to pay for car repairs after an accident you caused. Sometimes a lower deductible with a higher premium is worth it because it means you won’t have to pay $500, $1,000 or even $2,000 out of pocket. But only you know how much financial responsibility you are willing — and able — to take on.
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