What is an auto insurance deductible and how does it work?

Your auto insurance deductible is an out-of-pocket cost you’re responsible for when you file a claim to cover the cost of damages after a covered incident. Deductibles usually range between $100 and $2,000. Typically, the higher your auto insurance deductible, the lower your insurance rates. You can work with your insurance company to identify an appropriate deductible amount based on your financial situation (i.e. whether you can afford the deductible) and your insurance rates.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Mar 11, 2022

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What You Should Know

  • An auto insurance deductible is the amount you’re expected to pay out of pocket for repair costs in order to receive an insurance payout after you file a claim
  • In many cases, your auto insurance company will cut you a check minus the total amount of your deductible
  • Your deductible can directly impact your rates such that the higher your deductible, the lower your rates may be (and vice versa)

Understanding auto insurance is essential to ensuring that you can obtain the right coverage at an affordable price. One aspect of auto insurance that we know can be confusing is the auto insurance deductible.

So what is a car insurance deductible, and how does a car insurance deductible work? Furthermore, when do you pay the deductible for car insurance?

Continue reading this article for an explanation of the insurance deductible, to find out if there are insurance deductibles for different types of coverage, and to learn more about how to select the right deductible amount.

Before we jump into this overview of auto insurance deductibles, why not enter your ZIP code into our tool to obtain free auto insurance quotes from top companies so you can compare and save?

What is an insurance deductible, and how does it work?

An auto insurance deductible is the amount of money you’ll be expected to pay — if your vehicle is damaged in a car accident — before your insurance coverage will apply.

For example, let’s say you have a $500 deductible. If you are involved in a covered incident, and the damages total $2,000, you’ll have to pay $500 out of pocket. The remaining $1,500 will be covered by your insurance. Often, your insurance company will determine the total payout amount and cut a check for that number, minus your deductible.

Most, if not all, auto insurance policies include a deductible. Chances are that you have a deductible on your policy, and it’s important to know your deductible amount. You need to know what you could owe, as well as whether or not it makes sense to file a claim, based on comparing your deductible to the total cost of repairs.

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Do you have a single deductible or a different one for each type of coverage?

Do deductibles vary by coverage type? For example, is there a unique collision deductible? Different coverage types have different deductible requirements.

For example, in South Carolina, drivers must carry uninsured motorist coverage as a part of the minimum insurance requirement to drive legally. If you only purchase the minimum amount of uninsured motorist coverage, it will accompany a $200 deductible that you’ll need to pay before your insurance company’s coverage will apply.

Examine the table below for a summary of which coverage types typically include a deductible.

Auto Insurance Coverage TypeHas a DeductibleEstimated Deductible Range
Liability InsuranceNoN/A
Collision InsuranceYes$100 to $1,000
Comprehensive CoverageYes$100 to $1,000
Personal Injury Protection (PIP)Yes$100 to $1,000
Uninsured Motorist Bodily Injury CoverageNoN/A
Uninsured Motorist Property Damage CoverageYes$100 to $2,000
Medical Payments Coverage (MedPay)NoN/A
Mechanical Breakdown Insurance (MBI)Yes$250
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The deductible amounts listed in the table are estimated based on available data. You’ll need to speak with your insurance company to determine the exact minimum and maximum deductible amounts for your coverage. The deductible amount that you select will likely impact your insurance rates. Keep reading to find out how.

Does your insurance deductible affect your insurance rates?

The higher your deductible, the lower your insurance rates because with a higher deductible, your insurance company will have a lower payout after an incident. Additionally, your insurance company may perceive you as a low-risk driver — if you choose a higher deductible — due to your risk transfer.

If you’re in a covered incident and have a higher deductible, you’ll pay a higher out-of-pocket cost. Your insurance company perceives this as a sign that you’ll drive more carefully in order to avoid this additional expense.

How do you select a deductible?

If you’re wondering, “How do I select my deductible?” it depends on your circumstances. As mentioned above, average deductibles can be as high as $2,000, depending on the coverage type.

You’ll need to work with your insurance company to identify the right deductible amount for your coverage. However, it’s also important to consider your budget. If you select a higher deductible to maintain lower rates, will you be able to afford the deductible if you’re in an accident?

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When are you required to pay your deductible?

Typically, you’ll be required to pay your deductible if you file a claim for any covered incident, if it’s under coverage that includes a deductible. As stated previously, you may need to pay your deductible first before you receive your payout. Otherwise, your insurance company may subtract the deductible amount from the payout.

Are there ways to avoid paying your deductible?

In most cases, you’ll have to pay your deductible. However, you can ask the repair shop to consider waiving the cost of your deductible. And for certain types of damage, your insurance company may waive the cost of your deductible. For example, this is common for windshield and other glass repair claims.

What happens if you aren’t able to pay your deductible?

If you cannot pay your deductible, you may not be able to file a claim, particularly if the terms of your insurance policy demand your deductible payment up front before you receive your insurance payout.

If you need the repairs immediately, you could consider taking out a loan to pay your deductible. If the repairs aren’t catastrophic, you may be able to wait to file a claim until you’ve saved up to pay your deductible.

Additionally, suppose the estimated cost of repairs is less than your deductible. In that case, you might consider avoiding filing a claim altogether and simply paying out of pocket once you have saved the funds.

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Auto Insurance Deductible: The Bottom Line

An auto insurance deductible is an out-of-pocket cost that you’re responsible for before receiving a payout from your insurance company. In most cases, either you’ll need to pay your deductible first — before receiving a payout — or your insurance company will subtract the deductible amount from the payout before sending it to you.

You can work with your insurance company to set your deductible amount based on what you can afford and the estimated effect on your rates. Typically, the higher the deductible, the lower your rates will be.

Beyond choosing an auto insurance deductible level that you can afford and that lowers your rates, you can also save by comparison shopping. Enter your ZIP code into the tool on this page to acquire free auto insurance quotes and get started today.

Frequently Asked Questions: Auto Insurance Deductibles

If you’re still looking for information on the meaning of auto insurance deductibles, you can read these frequently asked questions for more details.

#1 – What happens if your deductible is higher than the cost of repairs?

If you’re in an accident or another covered incident — and the cost to repair any resulting damages is less than your deductible — you’ll be expected to pay out of pocket. In this case, if filing a claim could result in a rate increase, it may not be necessary to file a claim since you’ll be paying out of pocket either way.

#2 – Can you claim your auto insurance deductible on your taxes?

In certain circumstances, such as if you’re self-employed and use your vehicle as part of your business, the cost of your auto insurance may be tax-deductible. However, you probably can’t claim your deductible on your taxes, but you can speak with an accountant for confirmation.

#3 – Can you get reimbursed for your auto insurance deductible?

This depends on the situation. For example, if you have uninsured/underinsured motorist coverage, you’ll have to pay the deductible for that coverage before the insurance company’s payout will kick in. However, if the uninsured driver later pays the insurance company what they owe, you’ll receive a deductible refund.

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