What is a car insurance deductible?

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UPDATED: Mar 13, 2020

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Car insurance deductibles are part of almost every auto insurance policy but what exactly is a car insurance deductible? Are you always obligated to pay anytime you file a claim? How much does it cost? The answers to these questions will vary depending on the details of your car insurance policy but there are some things you know.

What is a car insurance deductible?

A car insurance deductible is essentially the amount of money you are committed to paying out-of-pocket before insurance coverage kicks in. Let’s say you have $6,000 damage and your policy has a $500 deductible. You are the responsible for the first $500 and the insurance company will pay the rest. Auto insurance policies can range from having no deductible up to $2,500 or more depending on the insurance company.

Higher Deductibles = Lower Premiums

While most policies come with a $250 or $500 standard almost every car insurance company offers an option to increase or decrease your deductible. One of the best ways to save money on auto insurance is to choose a higher one. The reasons for this simply relates to lower risk. When a driver is forced to pay a higher out-of-pocket cost the less likely they are to file smaller claims and since most car insurance claims are relatively small this greatly reduces the risk of an insurance company having to a pay future claim (thus lower risk equals lower premiums).

Do I always have to pay a deductible when I file a claim?

No. Many car insurance companies waive this in accidents causing total loss or when all the parties involved are insured by the same company. Some car insurance companies even offer incentives for good drivers where your deductible will decrease by $100 for every year of safe driving but this offer is usually limited to $500 maximum or 5 years good driving history. Whether or not any waiver or possible reduction applies to you will depend on the details of your policy and your car insurance company.

Should I always choose the highest option?

The decision whether or not to choose a higher deductible primarily rests on your financial means as in the event of an accident you will need to come up with money to pay the agreed upon out-of-pocket cost. Always try to find an amount that is within your financial means at all times since car accidents usually always occur at the worst moments and the last thing you want is no car and no money to pay to get it fixed.

Do all car insurance companies offer the same options?

Most car insurance companies offer many of the most common deductibles including $250, $500 and $1,000 but if you want a higher one its best to ask around as not all insurers offer policy options beyond $1,000. As far as waiving the deductible in the event of an accident this also depends on your policy details and your car insurance company. In fact, it’s a very good question to ask any potential car insurance company as to when they would waive the policy deductible in the event of a claim.

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