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When you get into a car accident and your car needs repairs, you’ll have to pay a certain amount of money before the insurance company will pay for damages. This amount of money is called a car insurance deductible. In this guide, we’ll explain what a deductible is, how it works, and how to choose one.
Our research team has reviewed the best car insurance companies around to help you find the right provider for your needs. Before choosing a policy, compare car insurance quotes from several providers.
A car insurance deductible is the amount of money you pay out of pocket before your insurance company will cover damages or medical expenses after an accident. You don’t pay the deductible to your insurance company, but rather to the repair shop that’s fixing your car or the medical office that’s providing treatment.
As an example, let’s say you have a $500 deductible. If you file an insurance claim that results in a $5,000 repair job, you’ll need to pay $500 toward any repairs or other damage before the insurance company will pay the remaining $4,500. If your claim is less than your deductible, you’ll be responsible for the full amount.
Health insurance deductibles reset each plan year. The money you spend out of pocket for health services adds up, which chips away at your deductible. Once you’ve met your deductible amount, the health insurance company takes over payments. The deductible amount resets at the new plan year.
With car insurance, you pay your deductible amount each time you file a claim. There’s no limit to how many times you pay your deductible per year, and out-of-pocket expenses don’t accumulate over time. You’ll also have different deductibles for different types of coverage. If you file a claim on your collision coverage, you’ll have to pay a different deductible than if you file a comprehensive coverage claim.
When purchasing an auto insurance policy, you’ll be able to choose your deductible amount. The amount of your deductible will change the amount of your insurance premium. If you choose a higher deductible, you’ll pay a lower premium. The opposite is also true: a lower deductible means a higher premium.
Typically, auto insurance deductibles range from $500 to $2,000. The most common deductible amounts are:
Many insurers set the default deductible at $500, though some people opt for lower or higher deductibles based on the coverage.
If you live in an area with high rates of vandalism or property theft, you may want a lower comprehensive deductible. This would help you pay less out of pocket if you filed a claim. To keep your total car insurance premium affordable, you may then opt for a higher collision deductible and pay less per month.
A vanishing deductible, sometimes called a “disappearing deductible” or a “diminishing deductible,” is a program offered by a few insurance companies to reward safe drivers. The longer a driver goes without filing a claim, the lower the deductible on their insurance policy gets.
If you have a vanishing deductible, you earn credit toward your deductible–usually $50 to $100–each year you go without claims, policy lapses, or certain violations. The four largest companies currently offering vanishing deductibles are:
No matter what state you live in, collision and comprehensive coverage will have deductibles. Liability insurance doesn’t have a deductible. Deductibles for the other main types of coverage vary from state to state.
The table below lists common types of car insurance, basic details of each coverage, and whether or not it has a deductible.
When shopping for car insurance, check out your state’s insurance guidelines to see what deductibles you may have to pay. Certain types of coverage–like PIP–aren’t available in every state but are required in no-fault states. For example, Utah requires PIP but doesn’t permit deductibles for PIP policies.
Here are the most common scenarios in which you’d be required to pay a deductible:
If you’re not found at fault for a car accident but the other party’s insurance claim takes too long to process, you can file a claim with your own insurance company. You may have to pay a deductible to get your car repaired, but you can then take the other party to court to recover your deductible.
The most likely situations in which you wouldn’t pay a deductible are:
When choosing a deductible for your car insurance policy, it’s important to understand your financial situation. If you want to reduce your insurance premium and you have the income to cover your deductible after a claim, it may be wise to choose a higher deductible.
If you don’t have the financial ability to pay a high deductible, choosing a low deductible will keep your out-of-pocket costs at a minimum. However, this will also lead to a higher premium.
Our team has researched the top insurance providers in the country. Before settling on an insurer, compare car insurance policies to find what best suits your budget and needs. We recommend starting your search with Geico and Progessive.
We found that Geico offers some of the most affordable car insurance rates on the market. It’s the second-largest insurer in the U.S., and that’s likely thanks to its high policy limits and wide variety of discount opportunities.
Geico holds an A++ financial strength rating from AM Best and an A+ rating from the Better Business Bureau. The insurer offers the six standard types of car insurance coverage as well as optional add-ons such as rental car reimbursement and rideshare insurance.
Read more: Geico review
Progressive is the third-largest insurance provider in the country. The company has an easy auto insurance quote process and a highly rated mobile app, helping it earn an excellent reputation in the insurance industry.
Progressive also has SnapshotⓇ, a usage-based insurance program that monitors your driving habits and rewards safe drivers. The company provides a full slate of standard coverage options, add-ons, and additional insurance products.
Read more: Progressive review
If you can afford to pay $1,000 out of pocket, having a higher deductible will keep your insurance premium much lower. Compare your deductible with your savings to determine which deductible is right for your finances.
A car insurance deductible is a portion of costs you must pay before your insurance company will pay for damages on your claim. Once you pay the deductible amount, your insurance company will cover the remaining costs.
No, to receive a payout for your insurance claim, you must first pay your deductible.
You have to pay the deductible directly to the repair shop or medical facility before an insurer will pay for any further repairs or medical bills. Payment is often due at the time of repair.
Our review process aims to deliver consistent and unbiased assessments of car insurance providers. While there are multiple qualities that make a car insurance company successful, our review team focuses on those we believe are the most important for consumers:
*Data accurate at time of publication.
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