What Is a Deductible in Car Insurance?

Deductibles may be a standard part of insurance policies, but that doesn't mean everyone understands how they work. In fact, some drivers aren’t aware that your deductible can actually impact the amount you pay for car insurance. Learn how car insurance deductibles work, which coverages they apply to, and how you may be able to lower your monthly car insurance payment by adjusting your deductible.

Everything You Need to Know About Deductibles

What is a car insurance deductible?

A deductible is the amount of money you would pay out-of-pocket, up front for the damages you suffer as the result of an auto accident or other collision. Deductibles can apply to the coverages you have for damage to your car, like comprehensive and collision. You could also have a deductible for medical payments or personal injury protection. Put another way, "it's the amount of a repair bill you are willing to pay when you file a claim," says Consumer Affairs.

How do car insurance deductibles work?

Here's how a car insurance deductible works. Let's say one day you accidentally back into a tree at your child's school. Your bumper is badly damaged and you need two new taillights. On average, a bumper replacement can cost between $885 and $1389, and new tail lights can run you at least $280.

Thankfully, you have collision coverage and a set deductible amount of $500. You contact your car insurance company to file a collision claim and then follow their instructions for getting your car repaired. Typically, the insured is responsible for covering the repair costs up to the deductible; the insurer covers the rest.

What deductible should I choose for car Insurance?

The answer to this question will vary from driver to driver. Depending on your coverage type, deductibles can range anywhere from $100 to $1,500. When picking your deductible, consider how much you're willing to pay if you need to file a claim. The amount you choose is typically up to you, unless your car is leased or financed. These agreements will typically have deductible requirements you must follow. If your car isn’t leased or financed, you can choose a deductible amount that you feel good about. Keep in mind that...

  • Higher deductibles generally mean lower premiums, but higher out-of-pocket costs in the event of claim.
  • Lower deductibles generally mean higher premiums, but lower out-of-pocket costs in the event of claim.

What are you most comfortable with? “Remember that in the event of loss you’ll be responsible for the deductible, so make sure you’re comfortable with the amount,” says the Insurance Information Institute

If you decide to raise your deductible, do your best to keep at least that amount of money in savings each month. That way if you need to file a collision or comprehensive claim, you have enough money on hand to pay your deductible and get your car repaired as quickly as possible.

If you decide to lower your deductible, you can always customize your insurance payment plan* so that your protection feels more affordable. Either way, friendly agents at Direct Auto Insurance can help you choose the right deductible for your situation. Call 1-877-GO-DIRECT (1-877-463-4732) or visit a Direct Auto location near you to learn more about car insurance deductibles today!

*Not all pay plans are available in all states and are subject to terms and conditions.