How Do Car Insurance Deductibles Work?

Updated October, 2020
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Your car insurance deductible is the set amount of money you have to pay towards car insurance repairs. The remaining balance is paid by your insurance company.

For example, you’re in an accident that causes $6,000 worth of damage to your car and your deductible is $500. This means that you pay $500 and your insurance pays $5,500 toward the repairs.

However, if your damages are less than the cost of your deductible, you may be required to pay the full amount.  

What kind of insurance requires a deductible?

There are two common insurance types that use deductibles:

  • Collision Insurance: No matter who's  at fault, collision insurance covers your car after an accident.  
  • Comprehensive Insurance: This insurance covers damage from things outside of your control. This includes fires, floods, and vandalism.

There are two other types of insurance that use deductibles:

  • Personal Injury Protection- PIP covers medical bills for you and your passengers. Some states require this type of insurance.
  • Uninsured/Underinsured Motorists- This type of coverage protects you when you’re hit by a driver who doesn’t have insurance. This also covers you when their insurance limits can’t cover the full amount of damage.

How do you pay your car insurance deductible?  

After an accident, you submit a claim to your insurance company for the cost of damages. Once your claim is approved, your insurance company issues a payout. Your insurer then subtracts your deductible amount from your claim’s payout amount.

As an example, let’s say your claim is approved for $2,500 and your deductible is $500. Your insurer writes you a check for $2,000. Therefore, you don’t have to worry about sending your insurer a check.

Just make sure that you can cover your deductible out-of-pocket. Some insurers may ask you to pay your deductible first.

When don't you have to pay your deductible?

You don’t need to worry about paying a deductible in the following situations:

  • It’s not your fault/or an insured driver hits you: When another driver hits you and it’s deemed their fault, their insurance is required to pay your damages. With collision coverage, you can choose to go through your own insurer. Your insurer later seeks reimbursement from the other driver’s insurance.
  • Someone files a claim against your liability coverage: In short, there's no deductible in a liability claim. You pay nothing towards any damages or injuries you caused another person, up to your policy’s limit. Your insurance pays for the liability claim.
  • You chose not to have a deductible- A few states offer the option of selecting a $0 deductible on comprehensive insurance.
  • You have free repairs on glass claims- For any glass damage that can be repaired instead of replaced, you may not need to pay a deductible. Some insurance companies (like Progressive) offer this in cases where glass repair is possible.

It's important you pick the right car insurance deductible

Make sure you pick the best car insurance deductible for your needs. Don’t forget to consider your out-of-pocket capabilities, your vehicle’s worth, and the type of coverage.

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