January 7, 2022

How Do Deductibles Work? A Complete Guide

The amount you’re willing to pay in a claim will affect the rate you pay for insurance.

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Deductibles are an insurance term referring to the amount you will pay in a claim. They are seen in health, home, and auto insurance. With auto insurance, deductibles are the amount you pay to fix your car in covered claims. Let’s take a closer look at how deductibles work in an insurance policy.

How Do Deductibles Work?

When you want to fix your car, you pay the deductible first, meaning this money comes before the insurance company pays a dime. If you are in an at-fault accident, you will pay your collision deductible and the insurance company will pay the rest of the claim. If your car is vandalized, you pay the comprehensive deductible and the insurance company pays the rest.

What Is a Deductible?

A deductible is the first amount of money that you’ll pay in a claim, but not every type of coverage includes a deductible. In auto insurance, deductibles don’t apply to liability claims. Rather, the insurance company pays deductibles up to the policy limits for collision or comprehensive claims.

Types of Deductibles

There are two types of deductibles for car insurance. The collision deductible is the amount you pay if you are in an at-fault accident and need to repair your car. The comprehensive deductible is for incidents that damage your car but are not your fault, such as theft, hail, windstorms, or vandalism. Your collision deductible can be different from the comprehensive deductible.


A split deductible often helps you get the coverage you want while saving money. Try a higher collision deductible than comprehensive deductible to see how much you can save.

How Does the Deductible Impact Rates?

There is an inverse relationship between premium rates and deductibles. Since the deductible is your amount of self-insurance, the higher the deductible, the lower the premiums. On the flip side, when you assume less of the risk with a lower deductible, your rates will rise.

How Do You Meet Your Deductible?

You meet the deductible during the claims process. Meeting the deductible means that you pay the amount of the deductible in the claim before the insurance company pays its portion.

For example, if the deductible is $500 and you have $3,000 in car damages, you would meet the deductible when you pay $500 to the auto body shop.

It is possible that you’ll pay for all the damages because the deductible is higher than the number of repairs. For example, if you file a claim and there is only $800 in damages, but your deductible is $1,000, you will not meet the deductible because it is a greater value than the claim. You will pay all $800 to fix the car and the insurance company will pay zero.


Don’t choose a deductible that is higher than your savings account or credit limit will allow you to pay. If you can’t meet the deductible, your car might not get fixed.

Average Car Insurance Deductible

Generally, car owners will choose a deductible that they can afford but that keeps the premium as low as possible. The average car insurance deductible is $500 to $1,000.1 Deductibles vary from $0 to $2,000.

Remember that the collision and comprehensive deductibles don’t need to be the same. You can have a $250 collision deductible with a $500 comprehensive deductible if you choose.

High vs. Low Deductibles

Car insurance companies have a wide selection of deductibles for most policies. Most people consider a high deductible to be $1,000 or higher. A low deductible is $500 or less. Most insurance agents feel that a $500 deductible is the sweet spot between what a customer can pay in a claim and what they can save on premium costs.

How to Choose a Deductible

A personal choice for every policyholder is whether they want comprehensive and collision coverage in the first place and what the deductible will be if they opt for the coverage. The agent can run quotes that show you the difference in premiums among policies with different deductibles. Choose the deductible that you can afford in a claim that saves you the most money in premium.2

How to Avoid Paying Deductibles

Unfortunately, you can’t always avoid paying a deductible. You will pay a deductible if you have an at-fault accident or comprehensive incident.

You can mitigate accidents by driving carefully and avoiding parking in large garages. Where you will avoid paying a deductible is if someone else hits you and you need to fix your car; their insurance will pay for all repairs.

Coverage Types That Don’t Need Deductibles

The liability portion of your policy does not have a deductible associated with it. Neither do extra coverages such as medical payments, rental car coverage, or emergency roadside assistance.

What Is an Insurance Limit?

An insurance limit is the most that an insurance company will pay in a claim. This is most often referred to within the liability portion of the auto policy but also pertains to comprehensive and collision coverage. The limits are the fair market value of the car, meaning that the insurance company will not pay more than what the car is worth in a claim.


Having the right coverage to repair your car is important. This is why you should have both comprehensive and collision coverage on your car. With comprehensive and collision coverage, you will select a deductible.

Your policies will be more expensive with these two coverages, but you can shop around to find a cheap car insurance company with low monthly premiums. Most likely, you’ll be able to find a dollar amount that you can handle to avoid any out-of-pocket costs. Just keep in mind that the lower the annual deductible, the higher the premium.


  1. How Do Auto Insurance Deductibles Work? American Family Insurance. (2022).

  2. Five questions to help you choose the right car insurance deductible. Nationwide. (2022).