How Auto Insurance Deductibles Work
How Auto Insurance Deductibles Work
See how collision and comprehensive deductibles can affect what you pay after certain covered losses and what to consider when choosing a deductible.
What Is an Auto Insurance Deductible?
A deductible is the amount you are responsible for under certain coverages before the insurance company pays the remaining covered amount, subject to the terms of your policy.
Deductibles are most commonly associated with collision and comprehensive coverage on personal auto insurance policies.
Your deductible does not usually mean that you send money to the insurance company first. Instead, it is typically deducted from the amount the insurer would otherwise pay for the covered damage.
Simple example: If a covered repair costs $3,500 and your applicable deductible is $500, the insurer may pay $3,000 and you would generally be responsible for the remaining $500, subject to the policy and claim circumstances.
Higher Deductible vs. Lower Deductible
Deductible selection is partly about deciding how much financial responsibility you are comfortable taking on after a covered loss.
Lower Deductible
You generally pay less out of pocket when a covered physical damage claim occurs.
- Lower financial responsibility after a covered claim
- May result in a higher premium
- Can be easier to manage if unexpected repair costs would strain your budget
Higher Deductible
You generally assume more of the initial cost when a covered physical damage claim occurs.
- Higher out-of-pocket responsibility after a covered claim
- May reduce the premium
- Can make sense for drivers comfortable retaining more financial risk
How a Collision Deductible Works
Collision coverage generally helps pay for covered damage to your insured vehicle caused by a collision with another vehicle or object, subject to the deductible and other policy terms.
If your vehicle is repairable after a covered collision, your collision deductible is typically subtracted from the covered repair amount.
Another Vehicle
Your covered vehicle collides with another automobile.
Fixed Object
Your vehicle hits a wall, pole, guardrail, or another object.
Rollover
Certain rollover losses may fall under collision coverage.
At-Fault Accident
Collision may help repair your own covered vehicle even when you caused the accident, subject to policy terms.
How a Comprehensive Deductible Works
Comprehensive coverage generally applies to certain covered non-collision losses involving your insured vehicle.
The comprehensive deductible is generally subtracted from the amount payable for a covered comprehensive claim, although certain types of losses or state-specific coverages may be handled differently.
Theft
Theft of the covered vehicle may fall under comprehensive coverage.
Hail
Certain hail damage may be covered under comprehensive.
Falling Objects
Damage from certain falling objects, such as tree limbs, may qualify.
Animal Contact
Certain losses involving an animal may be treated as comprehensive.
Fire
Certain covered vehicle fire losses may fall under comprehensive.
Vandalism
Certain intentional damage by another person may be covered.
How the Deductible Changes What You Pay
The following examples are simplified for educational purposes. Actual claim payments depend on the policy, covered damage, valuation, repair costs, limits, and other claim circumstances.
$500 Deductible
Covered repair amount: $4,000
Deductible: $500
Simplified insurer payment: $3,500
$1,000 Deductible
Covered repair amount: $4,000
Deductible: $1,000
Simplified insurer payment: $3,000
You Retain More Risk
The higher deductible means the driver assumes a larger portion of the covered loss. That tradeoff may result in a lower premium, depending on the insurer and policy.
What If the Damage Costs Less Than Your Deductible?
If the covered repair amount is less than the applicable deductible, there may be no payment under that physical damage coverage because the loss does not exceed the amount you are responsible for.
Example: If covered damage is $700 and the applicable deductible is $1,000, the repair amount is below the deductible. In that simplified example, you would generally be responsible for the full $700.
Deductibles Can Also Apply When a Vehicle Is Totaled
A deductible is not limited to repairable damage. If a covered collision or comprehensive loss results in the vehicle being declared a total loss, the applicable deductible may still be subtracted from the covered settlement amount.
The amount payable for a total loss is determined according to the policy terms and valuation process, and it may not be the same as the amount originally paid for the vehicle or the balance remaining on a loan.
Your Auto Policy Does Not Have One Deductible for Everything
Different coverages work differently. Collision and comprehensive commonly have deductibles, while liability coverage generally operates through coverage limits rather than a physical damage deductible.
Generally subject to policy limits rather than your collision or comprehensive deductible.
Commonly has its own deductible selected for physical damage claims.
Commonly has its own deductible, which may be the same as or different from the collision deductible.
Collision and Comprehensive Deductibles Can Be Different
Some drivers assume the same deductible must apply to both collision and comprehensive. Depending on the insurer, you may be able to select different deductible amounts for each coverage.
For example, a driver might choose a higher collision deductible and a lower comprehensive deductible, depending on available options, vehicle value, premium differences, and personal risk tolerance.
Can a Higher Deductible Lower Your Premium?
Increasing a collision or comprehensive deductible may reduce the premium because you are agreeing to retain a larger portion of certain covered losses.
However, the amount of savings varies by insurer, driver, vehicle, location, coverage, and other rating factors.
Do the math before changing it: A higher deductible only helps if the premium savings make sense for your budget and you could still comfortably pay the deductible after an unexpected loss.
How Should You Think About Your Deductible?
The right deductible is not necessarily the lowest or highest option. It should fit your budget, vehicle, financing requirements, and ability to handle an unexpected expense.
Emergency Savings
Could you pay the deductible tomorrow without creating a financial crisis?
Vehicle Value
Consider the value of the vehicle and how much physical damage protection matters to you.
Lender Requirements
Financing or lease agreements may limit the deductible amounts you are allowed to select.
Premium Savings
Compare the premium difference between available deductible options.
Risk Tolerance
A higher deductible means accepting more financial responsibility after a covered loss.
Overall Budget
Balance what you pay regularly in premium with what you could afford unexpectedly after a claim.
Your Lender May Limit How High Your Deductible Can Be
If your vehicle is financed or leased, the lender or leasing company may require collision and comprehensive coverage and may also place restrictions on the deductible amount.
Before increasing your deductible, review your loan or lease agreement to make sure the new amount satisfies the lender’s insurance requirements.
What If the Other Driver Was at Fault?
If another driver caused the accident, their liability coverage may potentially respond to your covered damages, subject to fault determination, available limits, and claim handling.
In some situations, you may choose or need to use your own collision coverage first. If your collision coverage applies, your deductible may initially be part of the claim.
Whether the deductible is later recovered can depend on fault, recovery from the responsible party or insurer, applicable law, and the specific claim circumstances. Recovery should not be assumed.
Windshield and Glass Claims May Work Differently
Glass damage is often associated with comprehensive coverage, but deductible rules can vary by insurer, state, and policy.
Some policies or jurisdictions may provide different deductible treatment for windshield repair or replacement. Review the actual policy rather than assuming your standard comprehensive deductible always applies the same way.
Common Deductible Mistakes
A lower premium may not be worthwhile if you cannot afford the deductible after a loss.
Collision, comprehensive, and other coverages can operate differently.
Financed and leased vehicles may be subject to maximum deductible requirements.
Claim handling and recovery can vary depending on how the loss is handled.
The relationship between the vehicle’s value and the deductible can matter, especially on older vehicles.
A cheaper quote may simply include a higher deductible or different physical damage coverage.
Check the Deductibles When Comparing Auto Quotes
Two quotes may appear to offer similar coverage but have very different deductibles. That can make one quote look less expensive while shifting more financial responsibility to you after a loss.
Questions to Ask About Your Deductibles
A few practical questions can help you select an amount that better fits your financial situation.
Auto Insurance Deductible FAQ
What is an auto insurance deductible?
A deductible is the amount you are responsible for under certain coverages before the insurer pays the remaining covered amount, subject to the policy terms.
Do I pay my deductible directly to the insurance company?
Usually, the deductible is reflected in the claim payment rather than being paid directly to the insurer. For example, it may be deducted from the amount payable for covered repairs.
Does liability insurance have a deductible?
Personal auto liability coverage generally operates through coverage limits rather than the collision or comprehensive deductibles used for physical damage coverage. Actual policy terms should always be reviewed.
Can collision and comprehensive have different deductibles?
Yes, depending on the insurer and available options, collision and comprehensive deductibles may be different.
Does a higher deductible always mean a lower premium?
A higher deductible may reduce premium, but the amount of savings varies by insurer, driver, vehicle, location, and other rating factors.
What happens if the repair cost is less than my deductible?
If the covered damage does not exceed the applicable deductible, there may be no payment under that coverage and you may be responsible for the repair amount.
Does my deductible apply if my vehicle is totaled?
An applicable collision or comprehensive deductible may still be subtracted from a covered total-loss settlement, depending on the policy and claim.
Do I pay a deductible if the other driver caused the accident?
It depends on how the claim is handled. If you use your own collision coverage, the deductible may initially apply. Recovery from another party may be possible in some circumstances but is not guaranteed.
Can my lender tell me what deductible to choose?
A lender or leasing company may require collision and comprehensive coverage and may place limits on the maximum deductible allowed under the financing or lease agreement.
What deductible should I choose?
Consider how much you could comfortably pay after a covered loss, your vehicle’s value, premium differences, lender requirements, and your willingness to retain more financial risk.
Not Sure Which Auto Deductible Makes Sense for You?
Best Formula Insurance can help you compare collision and comprehensive deductible options, premium differences, liability limits, and available auto coverage so you can better understand your choices before a claim happens.
This material is provided for general educational and informational purposes only and does not constitute insurance advice, legal advice, a coverage recommendation, a guarantee of coverage, or a contract of insurance. Deductibles, coverage options, claim payments, repair values, total-loss settlements, glass coverage, lender requirements, and policy terms vary by insurance company, state, vehicle, driver, and policy. Examples shown on this page are simplified illustrations only and do not represent a guaranteed claim outcome. Actual coverage and claim payments are determined exclusively by the terms, conditions, definitions, limits, deductibles, exclusions, and endorsements of the insurance policy issued and the facts of the loss. Please consult a licensed insurance professional regarding coverage options appropriate for your circumstances.