When Do You Pay a Deductible on Car Insurance?
Understand when and how your car insurance deductible applies, and the process of paying it for claims.
A car insurance deductible represents a fundamental component of most auto insurance policies. It is the specific amount of money a policyholder agrees to pay out-of-pocket toward a covered loss before their insurance company begins to pay the remainder. This mechanism serves to share the financial risk between the insured individual and the insurance provider.
What a Car Insurance Deductible Is
A car insurance deductible is a fixed amount a policyholder selects. This amount is subtracted from the total approved claim amount for damages or losses covered by specific parts of the policy. For example, if a repair costs $3,000 and your deductible is $500, you pay the first $500, and your insurer pays the remaining $2,500. If the repair cost is less than the deductible, the policyholder is responsible for the entire repair cost.
The choice of a deductible directly influences the cost of insurance premiums. Opting for a higher deductible results in a lower premium, while a lower deductible leads to a higher premium. Common deductible amounts range from $250 to $2,000, with $500 often considered a standard choice. A deductible applies per incident or claim, not per policy period. Different types of coverage, such as Collision and Comprehensive, have their own distinct deductible amounts, which policyholders can choose independently.
When You Pay a Deductible
A car insurance deductible is required when making a claim for damage to your own vehicle. For instance, if you file a claim under your Collision coverage for damage from an accident, you will pay your deductible, regardless of who was at fault. This applies whether your vehicle collides with another car or an object. Your insurer will cover the repair costs exceeding your deductible for these types of incidents.
A deductible applies when using Comprehensive coverage for non-collision damage to your vehicle. This includes events such as theft, vandalism, fire, certain natural disasters like hail or floods, or even hitting an animal. The deductible for Comprehensive claims works the same way as for Collision claims. Some policies for Uninsured/Underinsured Motorist (UM/UIM) Property Damage coverage may also include a deductible.
A deductible does not apply in certain situations. When your Liability coverage pays for damages or injuries you cause to others or their property, you do not pay a deductible. Medical Payments (MedPay) or Personal Injury Protection (PIP) coverages, which help pay for medical expenses after an accident, do not have deductibles. If another driver is at fault for an accident and their insurance company pays for your damages, you do not have to pay your deductible. However, if you use your own Collision coverage to expedite repairs in a not-at-fault accident, your insurer will pursue reimbursement from the at-fault party’s insurer through a process called subrogation, and if successful, they may refund your deductible.
The Process of Paying Your Deductible
Paying your car insurance deductible occurs at the point of repair or settlement. When your vehicle is repaired, you pay the deductible directly to the repair shop or body shop when you pick up your vehicle. This ensures the shop receives the full cost of repairs, with the insurance company covering the amount above your deductible. In scenarios where your vehicle is deemed a total loss, the insurance company will deduct the deductible amount from the settlement check issued to you.
You pay only one deductible per incident, even if multiple parts of your vehicle are damaged or different coverages are involved. If an incident triggers both Collision and Comprehensive coverage, you pay the higher of the two applicable deductibles. In instances where you initially pay your deductible for a not-at-fault accident, your insurance company will work to recover that amount from the at-fault driver’s insurer through subrogation. If this subrogation process is successful, your insurer will then reimburse you for the deductible you paid. Your insurer handles the negotiations and recovery efforts for this reimbursement.