What Is a Car Insurance Deductible and How Does It Work?

A car insurance deductible is what you pay out of pocket when you file a claim for repairs. You pay the deductible first, then your insurance covers the rest. This should be expected for collision and comprehensive insurance, and sometimes for other types like Personal Injury Protection.

The amount you choose for your deductible can affect how much you pay in premiums. When picking a deductible, consider your budget, how often you drive and any state-specific rules. There are also ways to avoid paying a deductible altogether.

A car insurance deductible is the amount you're responsible for paying when you file a claim with your collision or comprehensive insurance provider.

Essentially, it's your share of the repair costs.

When you need your car fixed after an accident or other covered event, you and your insurance company contribute to paying for the repairs. You cover the deductible, and your insurer takes care of the remaining amount, known as the settlement. This way, the financial burden is shared.

Typically, coverages that include deductibles are collision and comprehensive insurance. However, depending on your state's regulations and your specific policy, Personal Injury Protection (PIP) and Uninsured/Underinsured Motorist coverage may also have deductibles.

Liability-only car insurance, which includes bodily injury and property damage, does not have car insurance deductibles.

Additionally, some states, like California, offer the option to get a Collision Deductible Waiver. With this waiver, if you're hit by an uninsured driver who is entirely at fault, you won't have to pay a deductible before your insurance kicks in to repair your car.

In New Jersey, the deductible amount is $500. And in Texas, it's $250.

Imagine you're in a minor accident that results in $1,500 worth of damage to your car. Your insurance policy has a $500 deductible. You'll pay the first $500 for the repairs, and your insurance company will cover the remaining $1,000.

According to MoneyGeek's data, the average car insurance deductible amount is $500. However, you can usually choose between $250, $500 or $1,000 for comprehensive and collision deductibles.

Choosing the right deductible is key.

A higher deductible, such as $1,000, can contribute to cheaper car insurance costs, but ensure it aligns with your budget in case of accidents. Also, state laws can affect your choice. In South Carolina, you won't pay a deductible for glass repairs, and in Kentucky, windshield replacements have no deductible. Make sure to factor in these rules when picking your policy.

Choosing a full coverage policy with a $1,000 deductible could save you an average of $108 per year compared to opting for a $500 deductible.

Ultimately, the decision hinges on your comfort with your annual or monthly premiums and your ability to handle unexpected out-of-pocket costs.

Your state laws or insurer may offer options to skip paying deductibles. For example, some plans reduce deductibles over time, and some states waive them for specific repairs.

• Sign Up for Diminishing Deductibles: Some insurance plans offer diminishing deductibles that reduce your deductible amount for each year you don't file a claim. This could eventually eliminate your deductible altogether.

• Don't File a Claim: If the cost of repairs is less than or close to your deductible, it might be more cost-effective to pay for the repairs yourself.

• Use a Collision Deductible Waiver: You can add a collision deductible waiver to your policy in some states. If you get hit by an uninsured driver who is at fault, you won't have to pay a deductible.

• Benefit From State Laws: Some states, like South Carolina and Kentucky, have laws that prohibit insurers from collecting deductibles for certain types of repairs, such as windshield replacements.

Avoiding car accidents and vehicle damage is the goal, but eventual repairs might be necessary. Addressing your car insurance deductible questions beforehand ensures you're prepared for any unforeseen events.