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What are auto insurance deductibles?
Here's what you need to know...
- Not all auto insurance policies have a deductible
- In most states, only physical damage coverage options come with a deductible
- The deductible is the amount of the damages that you must pay for before the insurance company will pay for a covered loss
- In most cases the deductible is deducted from the claims payment and you must pay the repair shop the difference before your car is released
- You can carry a different deductible for both comprehensive and collision because the rates for each coverage are different
Using the term full coverage when you’re referring to an auto insurance policy can be misleading.
While it’s a common term, it’s one that leads people to assume that their policies will pay for any claim they present. In actuality, a full coverage policy has limits.
When you’re shopping around for auto insurance, it’s important to know what you’re paying for before you select a product. You can’t build the best possible plan unless you know what every component of a policy is.
Since all full coverage plans include deductibles, it’s very important to understand just how they work and what the average auto insurance deductible in your state is.
Here’s what you need to know about deductibles on a car insurance policy.
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Table of Contents
There’s No Deductible for Liability Coverage
Liability coverage is required in states where the at-fault party in an accident is responsible for paying third-party personal injury damages.
These states operate under what’s called a tort auto insurance system.
Since the coverage pays for third-party damages and not your own, no deductible is charged.
Property Damage Liability coverage is required in both tort and no-fault states. Instead of paying for medical bills, this form of coverage pays to repair third-party property that’s damaged in an accident.
Just like Bodily Injury, there’s no deductible assessed against you when a claimant makes a Property Damage claim. There is, however, a coverage limit.
If your claim exceeds the limit, you’re responsible for paying the difference.
What is physical damage coverage?
Property Damage coverage and physical damage coverage may sound alike, but they are two very different forms of protection.
Property Damage is a third-party coverage that must be included in a basic policy, and physical damage is an optional first-party coverage that you can elect to carry on one or more covered autos.
If you add physical damage coverage to your policy, you can choose to carry only comprehensive or both comprehensive and collision.
- Comprehensive will help you repair your car after damage caused by fire, theft, vandalism, explosion, wind or hail
- Collision pays specifically when your car collides with another object or rolls over
Choosing a Deductible for Physical Damage Coverage
If you decide that you want coverage for your vehicle, it’s your job to decide if you want to carry a smaller or larger deductible.
The deductible can make a huge difference on your premiums when you have a spotty driving record, or you’re an inexperienced driver.
By raising your deductible, you can keep your premiums lower and still enjoy the peace of mind the coverage gives you.
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What does it mean when you have a $1000 deductible?
The deductible doesn’t make as big of a difference for comprehensive coverage as it does for collision.
Comprehensive rates are more dependent on the vehicle that you own and the territory where you live.
If the property crime rates are high in your area or your vehicle is expensive, you may need a higher deductible.
If you want to see a difference in your rates, raising the collision deductible is wise. Collision insurance rates are based on your driving record and the history or other drivers who have access to your vehicle.
High-risk drivers almost always need to carry high collision deductibles. Here’s how much you could save:
- Save 7 percent by raising your auto insurance deductible from $250 to $500
- Save 9 percent by raising your auto insurance deductible from $500 to $1000
- Save 16 percent by raising your auto insurance deductible from $500 to $2,000
When are you charged your comprehensive deductible?
You’re obligated to pay your deductible whenever you file a claim for damages. In some cases, your company might waive your deductible, but for virtually all comprehensive claims your deductible will be charged.
If your car catches fire, is vandalized, or is stolen, the deductible amount that you carry will be deducted from your settlement offer. The only time where there’s an exception for a comprehensive claim is when you have a glass claim.
Glass claims present challenges for insurers because the cost to repair glass damage is often lower than the policy’s deductible.
To keep customers from driving with a damaged windshield, some companies will waive the deductible and cover the total cost of chip repair. This option is usually offered when the windshield has a small crack that can be repaired without replacement.
When are you charged a deductible for collision?
Having a collision claim doesn’t mean that you’ll always be responsible for paying a collision deductible.
There are a few circumstances where you’ll file a claim against your insurance, but you won’t be responsible for paying a portion of the loss.
Here are the most common scenarios where your deductible will be waived or reimbursed:
- You have a disappearing deductible plan and are eligible for a collision deductible waiver
- You file a collision claim because the other insurer is stalling the claims process. Your deductible will be reimbursed if the other party is at-fault
- You have Uninsured Motorist Property Damage and someone without insurance hit you. This coverage will waive your collision deductible
Are there deductibles for any other coverage on full coverage policy?
If you live in a state with any no-fault insurance system, you’re required by law to carry Personal Injury Protection.
Personal Injury Protection pays for your medical bills, rehabilitation costs, and some of your lost income after you’re injured in a car accident.
In some states, Personal Injury Protection requires a deductible. You’ll have to check with an agent in your area to see if you have the option to carry a deductible for Personal Injury Protection.
In most cases, you have just a monetary limit that you must select as you’re building your policy, but the rules vary from state to state and company to company.
If you’re shopping for auto insurance, it’s good to know how your decisions during the buying process can affect your coverage when you need to file a claim.
As you’re shopping around, you can easily compare the rates for high and low deductibles to make a decision. The process is even faster when you use an online rate comparison tool.
Shop the market for the best rates and get instant quotes today. Enter your ZIP code in our free tool below to get started.
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