In this article, we will explain:

  • What is deductible in car insurance.
  • How deductibles work.
  • How to choose your car insurance deductible.

What is a deductible in car insurance?

A deductible in car insurance refers to the amount of money on a claim you’re supposed to pay from your pockets.

Here is an example to help you understand.

Let’s say you got involved in an accident and your car sustained damage amounting to $2,000. We can also assume that you have $300 in deductibles.

Upon claim, your insurer will pay $1,700 for the repair of your vehicle. You, on the other hand, will have to pay the remaining $300 for repairs.

How do car insurance deductibles work?

Car insurance deductibles also affect the rates you pay.

Deductibles work similarly in all car insurance coverage. They are however more popular with collision and comprehensive covers. Make sure to check with your insurer on the insurance coverage where deductibles are applicable.

Let’s say your vehicle is wrecked in an accident. If the car’s worth is $40,000 and your deductible is $2,000, the insurance company will pay you the car’s current market value minus the deductible ($40,000 – $2,000 ﹦$38,000).

But what happens if the claim is less than your deductible?

If the repairs are worth $800, when your deductible is $1,000, your insurance company will pay you nothing.

Remember, the claim needs to be higher than your deductible for you to expect anything from your insurer.

How to choose your car insurance deductible

We hinted earlier that car insurance deductibles are calculated from the rates you pay.

Most deductibles range from $200 to $2,000. The amount that most drivers settle for is $500 in deductibles.

There is no price too high or too low when it comes to choosing your deductible. It’s all a matter of preference


The lower the deductible, the higher the car insurance premiums.

The higher the deductible, the lower the car insurance premiums.

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Factors to consider when choosing a car insurance deductible

1. Your financial capability

“Can I afford to comfortably pay my deductible should the risk occur?”—That is the most important question you should ask yourself before settling for a deductible.

The other thing you should have in mind is the worth of your vehicle.

Let’s say your car is worth $2,000. Going for $2,000 in deductibles makes no sense and will only work against you.

It’s always advisable to have some money in your emergency account. It’s even better if the amount is equal to, or more than your deductible. That way, should an accident happen, you’ll be able to get back on your feet in no time.

2. The vanishing deductible

Do you have difficulties saving money in your emergency fund? Then the vanishing deductible might be your best alternative.

What is a vanishing deductible?

It’s a reward for good driving in a specified period. If you stay a whole year without accidents or damage, your deductible decreases by a certain amount ($50 to $100).

You usually start with a free 100-dollar credit you can build over time. It applies to both comprehensive and collision car insurance coverage.

Once an accident happens and a claim is made, the deductible credit you’ve accumulated is put to use and reset back to $100.

3. The likelihood of the risk occurring

How likely are you to get involved in a car accident?

Some people go for high deductibles in exchange for low rates. Such people are betting that they’re less likely to get involved in car accidents.

Do you have a history of road accidents? Are the roads busy where you live? Are the drivers in your area more likely to cause accidents? If the answer is “yes,” then you’re much safer with low deductibles.

The same applies to damages. If your area is plagued with broken windshields, you are better off with high rates but low deductibles on windshield replacements.

4. Impact of deductible on price

As mentioned earlier, your deductible has a direct bearing on the price of your insurance coverage. Increasing your deductible can help with your savings. Nonetheless, not all increments in deductibles lead to big jumps in savings.

Be informed. Make sure you check in with your insurer before changing your deductible.

5. Different deductibles for different coverage

Be careful. Different deductibles for different coverage can be confusing (especially if you own 2 or more cars). Nonetheless, the technique makes sense and can save you some money in the long run.

For example, let’s say you have applied for both collision and comprehensive car insurance coverage.

You can go for a lower deductible with the comprehensive insurance coverage since its rates are cheaper.

On the other hand, you might want to go for a high deductible with the collision insurance policy since its rates are significantly more expensive.

When do you pay the car insurance deductible?

Some of you are thinking you’ll have to pay the deductible amount upfront after claiming compensation. That’s not the case.

The deductible amount is automatically subtracted from the money you claim from your insurer. If you claimed $2,000 for repairs after an accident with a deductible amount of $500, then your insurer will pay you $1,500.

Circumstances you’ll not pay your car insurance deductible

These are the circumstances where the deductible will not be subtracted from the amount you’ve claimed from your insurer.

1. If you choose zero-deductible

Though almost extinct, there are some insurers that still offer zero-deductible as an option.

2. If the other insured driver is responsible for the damage

If the other driver is 100% at fault, the other driver’s insurance company will do the repairs for you. If the fault is shared, your insurance company might expect a part of your deductible.

3. In the case of free glass repairs

In some places, some insurers can repair glass damage for free without replacing the damaged part. In such a case, you’ll not have to pay the deductible.

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