An insurance deductible is the amount you pay out of pocket before your insurance company pays for a covered claim. Deductibles work differently depending on your policy type. With health insurance, you pay an annual deductible after your policy renews. But this isn’t the case with car insurance. Instead, you pay an auto deductible each time you file a claim.

When you purchase a new policy or renew your current one, you’ll need to choose a deductible amount. While some insurers structure deductibles as a percentage of your coverage amount, most have a specific rate — often $500 or $1,000.1

How car insurance deductibles work

It’s common for car insurance companies to offer deductibles ranging from $500 to $1,000, though some might give you other options. You’ll generally need to pay your deductible amount out of pocket when you file a claim with your insurer.

Not all types of auto insurance products have deductibles, though. They’re often in effect with these coverage types:

You won’t have a deductible for your liability, uninsured motorist bodily injury, or medical payments (MedPay) coverage. But read the fine print on your car insurance policy if you’re not sure.2

While your car insurance deductible might seem like a hefty out-of-pocket cost, average total claim costs are often significantly higher. The average collision claim in 2022 was $5,992, and the average comprehensive claim was $2,738.3

To help you save, some insurers offer “disappearing deductibles” or “vanishing deductibles,” which reduce your deductible amount — often in $50 or $100 increments — if you drive safely for a certain period.

How deductibles affect car insurance premiums

A higher deductible typically results in lower premiums. That’s because your insurance company pays less after a claim, while your out-of-pocket costs are higher. When you choose a lower deductible, your insurer pays more if you file a claim. It accounts for this risk by charging higher premiums.

The average cost for a six-month premium with a $500 deductible is around $1,418 per month, while a policy with a $2,000 deductible costs $1,101 on average — a savings of $317.

Here’s how your chosen deductible might affect your car insurance premiums.

High vs. low deductibles: Which to choose

To some degree, high versus low deductibles are subjective. But generally, insurers consider $1,000 or more to be high car insurance deductible. By contrast, a low deductible is often around $500 or less.

When choosing an auto insurance deductible, you’ll want to consider several factors, including your:

• Risk tolerance

• Vehicle value

• Financial situation

• Whether you’re leasing or have financed your car (certain leasing companies may cap deductibles at a certain amount)

Weighing the total cost of your monthly premiums against your budget can also help you make an informed choice. For example, if you can afford slightly higher premiums but an unexpected $1,000 expense would break your budget, a lower deductible could be a better choice.

High deductibles

A high deductible could be expensive if you need to file a claim with your insurer, but it’ll reduce your car insurance rates. Some instances where a high deductible could make sense include:

• You’re comfortable with risk.

• You can afford a hefty cost if an unexpected event occurs.

• You’re a safe driver with a clean driving record.

• You drive an expensive car.

Low deductibles

A low deductible will be less expensive if you need to file a claim with your insurer, but it’ll increase your car insurance rates. 

Some instances where a low deductible could make sense include:

• You’re uncomfortable with risk.

• A hefty unexpected cost would be difficult to cover.

• You have several past car accidents.

• You drive an older, low-value car.

When do you have to pay your deductible?

With car insurance, you’ll need to pay a deductible each time you file a collision or comprehensive claim.

Here are a few instances where you’ll need to pay a car insurance deductible:

• You rear-end another driver’s vehicle and damage both vehicles. Your liability insurance would pay for damage to the other driver’s car, and your collision will cover your damages. So if your collision deductible is $500, and your repair costs are $4,000, you’d pay $500, and your insurance company would pay $3,500.

• A tree limb falls on your car and damages your car’s hood and front end. Your comprehensive deductible is $1,000, and repair costs are $3,000. You’d pay $1,000, and your insurance company would pay $2,000. 

• You accidentally back into a tree, damaging your back bumper and backup camera. Your collision deductible is $500, and repairs total $2,500. You’d pay $500, and your insurer would pay $2,000.

When do you not have to pay your deductible?

Below are some situations where you don’t have to pay your car insurance deductible.

You aren’t at fault in an accident

If another driver is liable for an accident, their liability insurance will generally pay for your repair costs. Liability coverage doesn’t have a deductible. 

You have a vanishing deductible

Some car insurance companies offer vanishing deductibles, which reduce your deductible by a certain amount — often $50 or $100 — every six months or year that you don’t file a claim. A deductible might not apply if you don’t have any past claims and your insurer has reduced yours to $0.

A deductible doesn’t apply for that particular coverage

Deductibles usually only apply for certain car insurance coverages, such as collision or comprehensive coverage. You generally won’t pay a deductible for your uninsured motorist bodily injury, medical payments, or liability coverage, but check with your insurer if you have questions.