How do car insurance deductibles work?
The definition of a deductible can vary based on the type of insurance you are referring to. Even between your home and auto insurance, the deductible you pay varies. For your auto insurance, a deductible is defined as your portion of the financial responsibility for repairs to your vehicle. Although this is a fairly straightforward way to describe your deductible, there are some individual details that can help save you money on your car insurance and determine the right policy for you. Let’s explore.
What is a deductible?
A deductible is what you pay out-of-pocket after an accident and filing an auto insurance claim, and the remainder is covered by your insurance company. Let’s look at an example. Say you back into a fire hydrant and cause $3,000 worth of damage to your vehicle. To get the repairs handled through your car insurance company, you would have to file a collision claim. If you have a $500 deductible and file a claim with your insurance company, your insurer would pay the remaining $2,500.
A deductible, however, only applies to specific insurance coverage options. Namely, a deductible doesn’t apply to your liability insurance. The liability coverage of your car insurance covers you for damage you cause to other people or their property. If you are at fault for a car accident, your liability insurance would pay for the bodily injury and property damage up to the coverage limit.
Depending on the nature of the accident and how much damage there is, you may have to weigh the pros and cons of either paying your deductible or covering the damage yourself out-of-pocket while forgoing an insurance claim. While your deductible can be a big expense at the time, you have to consider whether filing a claim will raise your rates going forward, resulting in you paying more over time to your insurance company, possibly even surpassing the amount you could have paid out-of-pocket. Knowing the implications of paying a deductible vs. out-of-pocket (namely, how it can affect your premium) can save you more money in the long run. Learn more about when to file an insurance claim.
As we stated, a deductible most commonly applies to these coverages: your collision, comprehensive, and uninsured property damage coverage. Let’s explore these coverage options.
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Different types of deductibles
Your collision coverage is pretty accurately named; it covers accidents when you collide with something, like a guardrail, a wall, or another vehicle. Unlike your liability coverage, your collision coverage does not factor in fault. Meaning that as long as you have the coverage and the damage occurred from a covered loss, you will receive compensation from your insurance company for your loss. Your collision deductible refers to what you pay.
The name “comprehensive” isn’t as descriptive as collision coverage is. Basically, comprehensive insurance coverage is designed to fill in any coverage gaps left by your collision coverage. It covers things “other than collision.” Sometimes called OTC, comprehensive coverage handles things like vandalism, theft, weather, and animal-related events. Like your collision coverage, you do not need to be at-fault or not-at-fault to use this coverage. As long as the damage occurs in a way that is covered by your insurance company, you will receive a claim payout (minus your deductible).
Uninsured motorist property damage (UMPD) works a lot like collision coverage. Still, it applies in a very specific situation: when you’re hit by a driver who doesn’t have insurance or whose liability limits aren’t high enough to cover your repairs. That’s where “uninsured” and “underinsured” motorist coverage comes into play.
Some agents may tell you that UMPD and collision are interchangeable, but they can affect your premium differently after a claim. Collision claims are usually treated like at-fault accidents, which almost always raise your rate. UMPD claims, however, vary by insurer. Because of this, it’s smart to ask your insurance company how they rate UMPD claims before removing
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How do deductibles affect car insurance rates?
As we’ve demonstrated, your insurance premium will be lower if you have a high deductible because they have an inverse relationship. This is because of the nature of car insurance deductibles: they represent your insurance company’s portion of responsibility for a claim. So by raising your deductible, you lower what your insurance company pays in the event of an accident. Below are the national averages for the data we presented.
Updating data...
| Coverage | Avg. Annual Premium |
|---|---|
| Liability Only | $597 |
| Full Coverage with $1,000 Deductible | $1,554 |
| Full Coverage with $500 Deductible | $1,760 |
Source: The Zebra
The Zebra’s Dynamic Insurance Rating Tool data methodology
The Zebra’s Dynamic Insurance Rating Tool for home and auto insurance rates utilizes the latest ZIP code-level rate filings from across the U.S., sourced from Quadrant Information Services and S&P Global. These filings, typically updated annually or biennially by insurers, are verified through Quadrant’s QA process and then integrated into The Zebra’s estimator.
The displayed rates are based on a dynamic home and auto profile designed to reflect the content of the page. This profile is tailored to match specific factors such as age, location, and coverage level, which are adjusted based on the page content to show how these variables can impact premiums.
For a comprehensive understanding, see our detailed methodology.
How to Find Cheap Car Insurance for a Financed Vehicle
It may come as a surprise that full coverage is often required on financed vehicles. Learn more about auto insurance with a bank auto loan or dealership financing agreement.
How to choose a car insurance deductible
Because there is some premium variance based on the deductible you choose, you should consider your deductible amount carefully. According to a Marble app survey, the majority of people balance their deductible and premium price or prefer a high deductible with lower premiums.[1] Here are some things to consider when thinking about your car insurance deductible.
✔️ Does your lien or lease require a certain deductible?
If you’re leasing or have a loan for your vehicle, you might not have an option when it comes to your deductible. Because of the way your lease and loan agreements are designed, you have a third party with an invested interest in your vehicle. If anything happens to your vehicle, they’lldeductible of $500 or less want it repaired. By having a high deductible, they fear you might not be able to pay it. Thus, most liens and lease agreements require a $500 deductible or lower.
✔️ How likely are you to file a claim?
If you’re deciding between a $500 deductible versus a $1,000 deductible — or any other option — consider how frequently you plan on using your coverage. Are you loaning or leasing your vehicle, in which case you'll need to keep it in near-perfect condition? Do you carry a driver on your policy who is less experienced behind the wheel — like a teenager? If you’re worried about your teen damaging your vehicle, a lower deductible might help assuage your fears about future expenses.
✔️ Do you want to avoid filing a claim?
Car insurance has an annoying habit of working as a double-edged sword: the more you use it, the more expensive it is. This is especially true with your collision deductible. Insurance companies often see collision claims as at-fault accidents, which will affect your rate. An at-fault collision may remain on your insurance record for three years. This means your premium will increase for three years after an at-fault claim. This can refer to a liability claim or collision.
Updating data...
| Accident/Violation | Avg. Annual Premium |
|---|---|
| Speeding 16 - 20 MPH over limit | $2,190 |
| At-fault accident - greater than $2000 | $2,605 |
| Reckless driving | $3,187 |
| Racing | $3,291 |
| DUI | $3,441 |
Source: The Zebra
As you can see, filing an at-fault claim where the damages are greater than $2,000 will raise your premium significantly, especially over the course of three years. Because of this, insurance experts encourage having a high deductible, as it discourages you from using it. You should use your collision coverage; however, if you suffer a catastrophic loss where the value of the premium increase plus your deductible is less than the cost of repairs, like if you total your vehicle.
Do you need comprehensive and collision coverage?
Since comprehensive and collision insurance aren’t required by law, there are situations where it may not make financial sense to keep them, especially if your car isn’t worth much. A common rule of thumb is that if your vehicle is worth less than about $4,000, you may not need physical damage coverage.
As a general rule of thumb in the insurance world, if your vehicle is worth less than $4,000, you do not need physical coverage. We recommend getting an estimate for your vehicle using online resources such as Kelley Blue Book and NADA online.
Below, we break down the average cost difference between full coverage (comprehensive + collision) and liability-only to help you see what you might save.
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| Company | Avg. 6 Mo. Premium | Avg. Monthly Premium |
|---|---|---|
| USAA | $257 | $43 |
| Travelers | $274 | $46 |
| GEICO | $297 | $49 |
| Progressive | $344 | $57 |
| State Farm | $399 | $66 |
| Farmers | $420 | $70 |
| Nationwide | $438 | $73 |
| Allstate | $530 | $88 |
| Esurance | $1,301 | $217 |
Source: The Zebra
For our liability-only policy, we selected limits of 50/100/50. While drivers are only required to meet their state’s minimum liability requirements, those limits are often far too low to offer real protection. If the cost of damage from a collision exceeds the policy’s coverage, the driver is responsible for the remaining balance out of pocket. To reduce that risk, choosing at least 50/100/50 in liability-only coverage is generally recommended.
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About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
- The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
- The Zebra’s insurance editorial content is not subject to review or alteration by insurance companies or partners.
- The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.
- The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.