Most states require drivers to have car insurance to legally drive on the road. Accidents can happen to anyone, even safe drivers, and that’s why full-coverage car insurance is essential to help cover expenses incurred due to damage caused to your vehicle or someone else’s car.
If you’ve recently been in a car accident and exchanged contact information with the other driver, your car insurance company requires you to file a claim.
After your claim has been approved, you may need to pay a deductible. But how exactly does a car insurance deductible work?
Understanding the details of car insurance deductibles can help you plan better for out-of-pocket expenses. This guide provides valuable information on when to pay your deductible and how to save money in the process.
What Is a Car Insurance Deductible?
When you file a claim for car insurance, you’ll need to pay a certain amount of money out of your own pocket. This amount is known as a deductible, and it’s agreed upon when you purchase your policy.
Once you’ve paid your deductible, your insurance company will cover the rest of the costs up to the limits outlined in your policy.
How Does a Car Insurance Deductible Work?
In the event of a traffic accident where your car’s front bumper is damaged, you need to report the accident to your insurance company and file a claim.
If your claim is approved, you will be required to pay a deductible before the insurance company can cover the cost of the damage.
The same applies if your car is stolen or vandalized. After you pay the deductible, your insurance policy covers the remaining cost of the vehicle loss.
A car insurance deductible is a way to share the financial responsibility for vehicle damage or loss with your insurance provider.
For example, if your car incurs $1,000 worth of damage, and your deductible is $250, your insurance company will first apply the deductible amount, and then cover the remaining cost.
In this scenario, your insurer will send a check for $750 to you or the repair shop, and you will be required to pay the remaining $250 to complete the repairs.
Which Types of Insurance Coverage Require a Deductible?
Your car insurance policy includes multiple types of coverage, and each of them serves a different purpose. Whenever you file an insurance claim, one or more of these coverage types will come into play to protect you.
Depending on the nature of your claim, you may not be required to pay a deductible. Take a look at the various coverage options available to you, so you can have a better understanding of what your provider expects you to pay.
Collision Insurance
If you happen to get into a car accident, don’t worry. Your collision coverage will pay for the repair or replacement of your vehicle.
This coverage applies even if you caused the accident or hit an object on the road. However, keep in mind that your auto insurance policy may require you to pay a deductible for collision insurance.
Comprehensive Insurance
Comprehensive insurance is a type of coverage that offers protection for your car against damage that collision insurance may not cover.
For instance, if you experience a situation where a rock hits your windshield while driving, your comprehensive coverage can help pay for the damage caused.
This insurance can also help with the cost of repairs or replacement if your car is damaged due to weather-related events such as floods, wildfires, or hail.
Additionally, comprehensive insurance can provide coverage for theft, vandalism, and any other situations that are beyond your control. However, keep in mind that you will be required to pay a deductible for this coverage.
Liability Insurance
Liability coverage is an insurance policy that pays for damages caused to other people’s vehicles as a result of an accident that you were responsible for.
It also covers property damage such as hitting a stop sign or driving through someone’s fence. In addition, this type of insurance provides coverage for injuries sustained by another person due to your accident. If you are found to be legally responsible, there is typically no deductible for liability coverage.
Personal Injury Protection
Starting from 2023, personal injury protection (PIP) is mandatory in 16 states. Most of these states follow a ‘no-fault’ system, which means that regardless of who caused the accident, you are required to have the minimum PIP coverage to pay for your medical treatment expenses.
However, the driver who is at fault for the accident is responsible for paying for the damages to your car through their insurance.
If you live in any of these states, you are required to have PIP coverage and may need to pay a deductible if an accident occurs. PIP covers the medical bills of both you and your passengers.
If you are unable to work due to your injuries, PIP coverage also includes lost wages so that you can focus on your recovery without worrying about your finances.
Medical Payments Coverage
There are similarities between medical payments coverage (MedPay) and Personal Injury Protection (PIP). However, the key difference is that PIP is available in states that follow a no-fault system, while MedPay is available in states that follow a fault-based system. Moreover, PIP is mandatory in some states, while MedPay is optional.
If you have MedPay coverage, your insurance company will pay for your and your passenger’s medical expenses, including bills for X-rays, doctor or hospital visits, surgeries, ambulance rides and emergency medical technician fees.
MedPay can also cover your health insurance deductibles or co-pays. The good news is that you don’t have to pay any deductible.
Uninsured or Underinsured Motorist Coverage
If you or your vehicle is harmed by another driver who doesn’t have insurance or has insufficient coverage, uninsured/underinsured motorist coverage comes to your aid.
Uninsured drivers are those who don’t carry auto insurance, while underinsured drivers have insurance, but their liability coverage limit is too low to cover your expenses.
This type of coverage assists you in paying for medical expenses or the damage inflicted on your car. Typically, uninsured/underinsured motorist coverage doesn’t require a deductible.
However, some states have a deductible on uninsured/underinsured property damage. You must check with your insurer to see if your state has such a requirement.
How to Choose the Right Auto Insurance Deductible
When deciding on the right car insurance coverage, it’s essential to think about the cost of car repairs. Depending on the level of damage, the cost of repairs can be quite high.
Moreover, if your car is entirely damaged, the cost of car replacement can be significant. To help you determine how much you can afford to pay out of pocket when paying a deductible to fix your car, you should consider these factors.
The average car insurance deductible is around $500, and insurance companies offer deductibles ranging from $0 to $1,000 or higher, depending on the coverage selected in your insurance policy. While it may seem expensive, there are still ways to save money.
To find the right deductible, you can start by contacting your car insurance company and discussing your options. They can also help you add any discounts to get a lower premium. Keep in mind that you pay a premium monthly or every six months in exchange for car insurance coverage.
One of the ways to get the lowest car insurance rate is to have a high deductible. Alternatively, you can remove certain coverages if they’re not required. This option can help you avoid paying that deductible and may lower your premium.
Frequently Asked Questions
Is It Better to Have a High Deductible?
If you opt for a high deductible for your auto insurance policy, it can lower your monthly premium. This approach may work well for you if you rarely file claims.
However, it’s crucial to keep in mind that your financial situation is the deciding factor. You may be able to afford the regular maintenance costs of your vehicle, but what if you face collision damage that goes beyond your budget?
If that happens, you might be caught off guard and need to pay a high deductible before the repairs are made. Therefore, it’s important to choose a deductible that aligns with your financial capacity and realistic about the out-of-pocket expenses you can manage.
Are There Any Perks to Having a Low Deductible?
If you have a limited budget, choosing a low deductible is a good option as it means you’ll only have to pay a small amount to cover your expenses.
However, it’s important to note that selecting a lower deductible will result in higher monthly premiums. If you can afford to pay a slightly higher monthly fee, then this could be a suitable choice for you.
What Is a Vanishing Deductible?
It’s possible that your automobile insurance provider offers a discount for safe driving. This is dependent on the policy you have.
A lot of insurance companies provide incentives for those who have driven an entire year without getting into an accident or receiving a traffic violation.
This incentive comes in the form of a reduced deductible which decreases by a fixed amount each year. Eventually, your deductible may be completely waived.
When Do I Have to Pay a Deductible?
If you cause an accident, you will have to pay a deductible. You may also have to pay a deductible even if you’re not at fault, depending on your auto policy coverage. Always review your insurance policy to better prepare yourself for unexpected incidents, such as accidents where both parties are at fault.
When Am I Not Required to Pay a Car Insurance Deductible?
If your car is hit by an insured driver causing an accident, you won’t be required to pay an insurance deductible. The other driver’s insurance company will take care of any damage to your vehicle or property.
If you’re injured, their insurance will cover your medical expenses. You’ll need to submit your claim directly to their insurance company to receive compensation.
However, if an uninsured driver hits you, your uninsured motorist coverage will be activated. There’s no need to pay a deductible for this coverage. Your car insurance company will help you file a claim to cover any damages or medical expenses.
In some states, a deductible may be applied for damage to your vehicle. If you’re unsure about your coverage, contact your insurance agent for assistance.
Can I Avoid Paying a Deductible?
It is possible that your insurance company offers a policy with no deductible. This means that if you get into an accident, your insurer would cover the entire cost of repairing your car.
However, this kind of insurance usually has expensive premiums, so it may not be a good idea if it is not affordable for you.
Another way to avoid paying your car insurance deductible is to negotiate with your mechanic at the repair shop. They may waive the deductible in exchange for your business. However, this option may not always be available or result in your favor.
If you cannot afford to pay the remaining balance in full, you can set up an installment plan with the mechanic. But keep in mind that the repair shop may hold onto your car until you pay the debt. It may be best to stick with your car insurance company and work with them to pay the expenses together.
Car insurance is essential to protect you, your passengers, and other drivers in case of an accident. Filing an insurance claim often means you need to pay a deductible. But you don’t have to feel trapped with a car insurance deductible if you understand how it works.
Also, there are ways you can lower your monthly expenses, like opting for a higher deductible. Stay informed on ways to save money on car insurance and always drive safely.
