CAR INSURANCE DEDUCTIBLES: YOUR QUICK GUIDE

Ever wonder what is a deductible on a car insurance policy? It's the amount you pay first toward your vehicle's repairs if you have Comprehensive or Collision coverage (coverage that protects your vehicle from theft, vandalism, car accident and more).

Example: If your car has $5,000 in damage and your deductible is $1,000, you pay the first $1,000, and your insurer covers the remaining $4,000.

Why Do Deductibles Exist?

Deductibles make the claims process more efficient by discouraging small claims that cost more to process than the actual damage. They also help prevent fraud and give you control over your rates (see next section).

How Deductibles Affect Your Premium

Generally, a higher deductible lowers your car insurance premium. For example, raising your deductible from $500 to $1,000 can significantly reduce your rate. This is especially helpful if you face higher premiums due to age, location, driving record, or vehicle type. While some opt for deductibles of $2,000 or more, ensure you can afford that amount out-of-pocket if needed.

When Do You Pay Your Deductible?

You typically pay your deductible to the body shop when you pick up your repaired car. If your car is a total loss, the deductible is subtracted from your settlement payment.

What if the Damage is Less Than My Deductible?

If repair costs are less than your deductible, it's usually not worth filing a claim. Why pay a $500 deductible for $300 in damage? Your insurer also won't process a claim unless the damage exceeds your deductible.