What is a car insurance deductible and how does it work?

Drivers must pay a set amount of money, called a deductible, whenever they file a collision or comprehensive claim. Most insurance companies offer a range of deductible prices so when you buy auto insurance, choose an auto insurance deductible that works with your budget. While having a higher deductible can reduce your rates, choosing an affordable auto insurance deductible and using discounts to lower your rates is a wiser choice.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Feb 1, 2022

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Overview

  • You can raise your deductibles to lower your rates
  • You must pay your deductible to receive reimbursement for a collision or comprehensive claim
  • You can shop online for cheaper insurance policies

Have you ever wondered, “What does deductible mean in car insurance jargon? What does my deductible do?”

No one likes to be caught off guard when it comes to their auto insurance so understanding the insurance deductible meaning in your policy is just as important as understanding how each different type of coverage works to protect you. Your deductible is a set amount of money that you would have to pay in order to receive reimbursement for repairs  after filing certain types of claims with your insurance company.

It’s also important to note that if you want lower auto insurance rates an auto insurance deductible can be a useful tool that you can use to make that goal attainable. Knowledge is power, and it would behoove you to know how every aspect of your insurance policy works so you can utilize it properly.

Keep reading to learn the answer to what is a deductible in auto insurance, how your deductibles work, and how an auto insurance deductible affects car insurance quotes you get online too.

If you want to see how an auto insurance deductible can lower your rates, enter your ZIP code to start comparing free quotes.

What is an auto insurance deductible?

If you need to file a collision or comprehensive claim, you’ll need to pay a deductible. This is a set amount of money that you will pay the insurance company before funds are released to you to fix your vehicle if it needs repairs.  Now, most insurance companies offer a range of deductible amounts so when you buy auto insurance, an auto insurance deductible amount has to be chosen by you before you finalize a quote.

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How does an auto insurance deductible work?

If you happened to be out driving down a beautiful wooded lane and had a deer jump into your car, you would have to bring your vehicle into your local mechanic’s shop. So when do you pay the deductible for auto insurance?

Well, let’s say that the total amount to repair your car is $3,000. If you were to file a comprehensive claim with your insurance company to help pay for the repairs, this is when you would need to first pay your deductible.

If your comprehensive deductible was $500, you would need to pay that first, and then your insurance company would give you $2,500 to help you restore your vehicle. This process would be the same if you ever had to pay your collision deductible as well.

While some insurance companies offer a $0 deductible, you must remember that the lower your deductible, the higher your rates will be.

The Cost of Auto Insurance

Even if you’re currently trying to cut down on your spending, it’s important to have an affordable auto insurance deductible. It might be alluring to secure a cheap insurance rate by hiking your deductible up to the highest dollar amount possible, but that could end up costing you quite a pretty penny if you ever needed to file a collision or comprehensive claim.

The best thing you can do to stay within your budget is to find an insurance company that offers great low rates without you having to choose an extreme deductible amount. You can shop online to find the best policy that fits your insurance and financial needs.

You can also use this data table to get an idea of what you might pay with some of the top insurance companies:

Average Monthly Auto Insurance Rates by Company
Top Auto Insurance CompaniesAverage Monthly Auto Insurance Rates
Allstate$408
American Family$287
Farmers$349
GEICO$268
Liberty Mutual$508
Nationwide$287
Progressive$337
State Farm$272
Travelers$370
USAA$212
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Thankfully, adjusting your deductible isn’t the only way you can take control of your rates. As you become more knowledgeable about the world of insurance, you’ll discover that you have more control over your policy than you once thought possible.

How can drivers keep insurance rates low?

If you were to ask your auto insurance company, “my auto insurance deductible is low currently, but should I raise it to reduce my rates?” you would most likely be told that while this is an option available to you, it probably isn’t the best one. One of the easiest things you can do to keep your insurance rates low is to review your quotes when you shop online and see if you are eligible for any discounts.

Below you can see just how much you save with some of the top companies in the industry when you make use of all the available discounts:

Auto Insurance Discounts from Top Companies
Auto Insurance DiscountsAllstate (%)American Family (%)Farmers (%)GEICO (%)Liberty Mutual (%)Nationwide (%)Progressive (%)State Farm (%)Travelers (%)USAA (%)
Adaptive Cruise ControlN/AN/AN/AN/A5N/AN/AN/A
Adaptive HeadlightsN/AN/AN/A5N/AN/AN/A
Anti-lock Brakes5555
Anti-Theft25202515
Claim Free2610152312
Continuous CoverageN/AN/AN/A15N/A
Daytime Running Lights155N/A
Defensive Driver105105103
Distant StudentN/A107
Driver's Ed10N/A101583
Driving Device/AppN/A30402050305
Early SigningN/A8N/A1012
Electronic Stability ControlN/A5N/AN/AN/A
Emergency DeploymentN/AN/AN/A25N/AN/AN/AN/AN/AN/A
Engaged CoupleN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Family LegacyN/AN/AN/AN/AN/AN/A10
Family PlanN/AN/AN/A25N/AN/AN/AN/A
Farm VehicleN/AN/AN/AN/AN/AN/AN/A
Fast 5N/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Federal EmployeeN/AN/A810N/AN/AN/AN/AN/A
Forward Collision WarningN/AN/AN/AN/A5N/AN/AN/A
Full PaymentN/A$5N/AN/A7.5N/A
Further EducationN/AN/AN/A1015N/AN/AN/A
Garaging/StoringN/AN/AN/AN/AN/AN/AN/A90
Good CreditN/AN/AN/AN/AN/A
Good Student1522.5102583
Green VehicleN/A5N/A10N/AN/AN/A10N/A
HomeownerN/AN/A535N/A
Lane Departure WarningN/AN/AN/AN/AN/AN/AN/A
Life InsuranceN/AN/AN/AN/AN/AN/AN/AN/A
Low Mileage30
LoyaltyN/AN/AN/A5N/AN/A
MarriedN/AN/AN/AN/AN/A
Membership/GroupN/AN/AN/A107N/AN/AN/A
MilitaryN/A154N/AN/AN/A
Military GaragingN/AN/AN/AN/AN/AN/AN/AN/AN/A15
Multiple DriversN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Multiple Policies1029102010121713
Multiple Vehicles25102010208
New AddressN/AN/AN/AN/A5N/AN/AN/AN/AN/A
New Customer/New PlanN/AN/AN/AN/AN/AN/AN/AN/AN/A
New GraduateN/AN/AN/AN/A5N/AN/AN/AN/AN/A
Newer VehicleN/AN/A401012
Newly LicensedN/AN/AN/AN/A5N/AN/AN/AN/AN/A
NewlywedsN/AN/AN/AN/A5N/AN/AN/AN/AN/A
Non-Smoker/Non-DrinkerN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Occasional OperatorN/AN/AN/AN/AN/AN/AN/AN/AN/A
OccupationN/A1015N/AN/AN/A
On-Time PaymentsN/AN/AN/AN/AN/AN/AN/A15N/A
Online ShopperN/AN/AN/AN/AN/AN/A7N/AN/AN/A
Paperless DocumentsN/AN/A5$50N/AN/AN/A
Paperless/Auto BillingN/A$30$233
Passive Restraint402040
Recent RetireesN/AN/AN/AN/A4N/AN/AN/AN/AN/A
RenterN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Roadside AssistanceN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Safe DriverN/AN/A15N/A3531152312
Seat Belt UseN/AN/AN/A15N/AN/AN/AN/AN/AN/A
Senior DriverN/AN/AN/AN/AN/AN/AN/A
Stable ResidenceN/AN/AN/AN/AN/AN/AN/AN/A
Students & AlumniN/AN/A107N/AN/AN/AN/A
Switching ProviderN/AN/A10N/AN/AN/AN/A
Utility VehicleN/AN/AN/AN/AN/AN/AN/A
Vehicle Recovery1535255
VIN EtchingN/AN/AN/A5N/A
VolunteerN/AN/AN/AN/AN/AN/AN/AN/AN/A
Young DriverN/AN/AN/AN/AN/AN/AN/A$75
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With the use of these discounts, you can not only keep your rates low but also avoid picking a deductible amount that could drain your bank account if you need to file a claim. Remember, when shopping for insurance online it’s always best to find a policy that works for you rather than the company, and isn’t the other way around.

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What You Need to Know About Your Insurance Deductible

Drivers who need to file a collision or comprehensive claim will need to pay a deductible first. You get to choose the amount of your deductible so make sure you choose one that you can afford to pay if you ever needed to file a collision or comprehensive claim.

While it may be tempting to raise your deductible in order to procure a cheaper insurance rate, the immediate reward is not worth the long-term risk. Instead, you should review every quote you receive online and make sure that you are being awarded every discount you qualify for. You can even keep your rates low by maintaining a good credit score.

Now that you know how an auto insurance deductible works, enter your ZIP code to get free quotes to see how much you can save on your insurance today.

Free Insurance Quote Comparison

Enter your ZIP code below to compare cheap insurance rates.

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