Choosing Car Insurance Deductibles

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Ava Lynch

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Ava joined The Zebra as a writer and licensed insurance agent in 2016. She now works as a senior insurance contributor, providing insights and data a…

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How do car insurance deductibles work?

The definition of a deductible can vary based on what type of insurance you are referring to. Even between your home and auto insurance, what defines your deductible 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.

insurance policies

What is a deductible?

 

Car insurance deductibles defined:

A deductible is what you pay out-of-pocket after an accident and filing an auto insurance claim — 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. In order 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.

The most common auto insurance deductible levels:

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.

Collision deductible

Your collision coverage is pretty accurately named; it specifies protection from accidents that occur when you collide with something — like if you hit 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.

 

Comprehensive deductible

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 vandalismtheftweather, 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).

damaged car

Uninsured property damage coverage

Uninsured property damage coverage, or UMPD, closely mirrors your collision coverage. It provides physical coverage to your vehicle if you’re in a not-at-fault accident in which the other driver either does not have insurance, or the limits on his liability coverage are exhausted before your vehicle can be fully repaired. This is what is meant by the term uninsured motorist or underinsured motorist.

While your insurance agent might advise you that UMPD and collision are the same and thus you only need one, you should consider how these types of claims can affect your rate. A collision claim is usually rated on your premium as an at-fault accident — meaning, it will cause your premium to increase. However, a UMPD claim has more variance than a collision claim in terms of a premium increase. We recommend speaking with your insurance company if you’re considering dropping this coverage to see how a UMPD claim would be rated. If your insurance company would consider a UMPD claim to be the same as a collision claim, you probably don’t need this coverage.


Where to find cheap car insurance with a custom deductible

Even if you’re not sure what amount of deductible you want, you can compare rates from some of America's most popular insurance companies online for free. Just enter your ZIP code below to get started.

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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, you can see the national averages of the data we presented.

Average Premium by Coverage Level

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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 choose a car insurance deductible

Because there is some premium variance based on the deductible you choose, you should consider your deductible amount carefully. 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’re going to 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.

magnifying glass question

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 be increased for three years following an at-fault claim. This can refer to a liability claim or collision.

Accident Premium After Accident

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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.

 

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Do you need comprehensive and collision coverages?

Because comprehensive and collision are not required by law, there are times when it will make financial sense not to pay for these coverages — namely, if the value of your vehicle isn't worth the premium it costs. 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.

If you determine that you do not need comprehensive and collision coverage, below are some rates for a liability-only policy.

Liability Rates by Company

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Company Avg. Annual Premium
USAA $549
GEICO $624
Nationwide $711
State Farm $756
Progressive $881
Allstate $934
Farmers $945

Source: The Zebra

For our liability-only policy, we selected limits of 50/100/50. However, drivers are only required to carry their state's minimum requirements. Carrying only state-minimum liability insurance is not recommended, as the coverages can be quite low depending on the state.

If the value of the damage a driver causes in a collision exceeds their coverage, they end up responsible for the remainder of the damages. Because of this, it's recommended to carry at least 50/100/50 for liability-only coverages. See below for what this would look like on a monthly billing plan.

policy paperwork
Liability Rates per Month

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Company Avg. Monthly Premium
USAA $46
GEICO $52
Nationwide $59
State Farm $63
Progressive $73
Allstate $78
Farmers $79

Source: The Zebra


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Do I pay a deductible for a liability claim?

Great question, thanks for reaching out to The Zebra. You are not responsible for a deductible unless you have comprehensive and collision coverage. Since you only have liability insurance, the damages to your car will not be covered which means there is no deductible.Liability coverage is there to…
Dec 17, 2018 Chicago, IL

Can a lender dictate what my deductible is?

Unfortunately, the terms of your loan can dictate what your coverage deductibles must be. Your lienholder may not necessarily notice right away if you change your deductible, but if they catch on they will add force-placed insurance, also known as collateral protection insurance, as a part of your …
Jan 23, 2020 Jacksonville, FL

Why do I have to pay a deductible if I was hit by an uninsured driver?

Unfortunately, recovering the cost of your deductible, if the other driver is uninsured, is up to you. I would definitely recommend asking to speak with a supervisor at your insurance company to see if you have any other options available, but you may have to pay the deductible simply to start the …
Apr 21, 2017 Palmer, AK

Do I still have to pay a deductible for a hit and run incident?

In the case of a hit-and-run, if you filed a police report and have uninsured motorist coverage, this could be used to cover the damages. This is additional coverage that must already be on your policy. It could also be covered by the collision portion of your insurance, but keep in mind your premi…
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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.