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Car Insurance Deductibles

Understanding Auto Insurance Deductibles

Your auto insurance provides peace of mind that your insurance company will step in and help you recover if an unexpected event occurs. But it’s important to understand that, even though you’ll be getting financial support from your insurer, you’ll still be paying money out of pocket — otherwise known as a deductible.

What Is a Car Insurance Deductible?

A car insurance deductible is the amount you pay out of pocket before your insurance company covers any financial loss from a car accident. You choose your deductible amount along with your coverage limits, and are expected to pay up to the deductible amount before your insurance company will cover any costs.

Typically, people choose a collision deductible of $250, $500 or $1,000. Comprehensive deductibles are usually $100, $250 and $500 — although a $0 deductible is available.

Car Insurance Deductible FAQs

  1. If you file a claim for damages to your vehicle, you’ll be expected to pay your deductible before your insurance company will help cover the cost.

    To put it in perspective, let’s say you got into a fender bender that caused $2,000 worth of damage. If your deductible is $500, you’ll pay that amount out of pocket and your insurance company will pay the remaining $1,500 for damages.

  2. A deductible and premium are actually very different. A premium is the amount you pay (usually monthly or in full every six months) to your insurance company, and in return they’ll provide coverage if you file a claim.

    Your deductible is a completely separate amount from your premium. It still comes out of your pocket, but you’ll only ever pay a deductible if you file a claim.

  3. This is an excellent example of why comprehensive coverage is so important. Damage to your car caused by something other than a collision with a vehicle or object — theft, vandalism, fire, flood or storm damage — is covered under your comprehensive coverage. And you’ll usually have to pay a deductible under these circumstances.

  4. You won’t have to pay a deductible for the other driver because your liability coverage will pay for the other car’s damages, and liability does not typically have deductibles. You’ll still pay a deductible under your collision coverage to pay for repairs to your vehicle.

  5. The short answer? Maybe. You can choose to wait until the at-fault driver’s insurance company connects with you and pays for your damages, but that method is rarely swift. If you want to get the process rolling to get back on the road quicker, your other option is to file a claim with your insurance company.

  6. Good question. If you’re involved in a hit-and-run accident, you’ll hopefully have either collision or uninsured motorist property damage coverage. Collision coverage helps protect you no matter who is at fault in an accident, so typically you’ll be able to use this coverage to make a claim. Keep in mind, you’ll be responsible for a deductible if you use your collision coverage.

    Depending on your state, uninsured motorist property damage coverage may also help cover repair costs if your car is damaged in a hit-and-run. Like collision, uninsured motorist property damage coverage generally has a deductible that you’ll be responsible for paying.

  7. Yes, if you hit a deer or other animal, you’ll be paying a deductible unless you’ve chosen a $0 deductible. Many people choose lower deductibles for comprehensive coverage, which covers things like hitting a deer, than they do for collision coverage.

  8. When you have low deductible car insurance, you’ll pay less out of pocket if you have to file a claim, but your car insurance premium will be higher. On the other hand, if you choose high deductible car insurance, you’ll have a lower premium but pay more out of pocket if you’re involved in an accident.

Low Deductible vs High Deductibles

Now that you know what a deductible is, you’ll need to decide if you want a low or high deductible for when you file a claim. But which one is right for you? To answer this question, it helps to understand how the price of your deductible affects your premium.

Lower Deductibles

  • Pay less out of pocket in the event you file a claim
  • Pay more in premiums over a longer period of time
  • Pay more each month for premiums
  • Be able to afford paying more up front in monthly premiums.

Higher Deductibles

  • Pay more out of pocket if you have a claim
  • Premiums will be lower each month
  • May need to save emergency money in case of a claim to cover higher deductible

Auto Deductibles: Example Scenarios

Scenario: A tree branch crashed down on the hood of your car during a thunderstorm.

You take your car to the mechanic and find out it’s going to cost $1,500 to fix it. Since you chose comprehensive coverage with a low deductible of $250, you’ve been paying a little more each month for your premium and will only be paying $250 out of pocket for the damage. Your insurance company covers the remaining $1,250.

Scenario: You hit a tree with your car.

Now, let’s say you hit a tree with your car, which is covered under your collision coverage. You wanted to pay less on your monthly premium and selected a $1,500 deductible for your collision coverage. The estimate to repair the damages on your car is $1,500 — the same as your deductible. In this instance, it wouldn’t make sense to file a claim since the amount you’re paying for your deductible would be the same amount to cover the damages on your own. By the time you paid your deductible, there wouldn’t be anything left for your insurance provider to cover.

Tips for Auto Deductibles

Choose an amount you can afford. Deciding to opt for a low or high deductible is unique to you. Can you afford to pay more for your premium but pay less in the event you have to file a claim? Or are you okay with paying more out of pocket when filing a claim? That’s your call, but an agent is always happy to give you their expert advice and help you choose a deductible you’re comfortable with.

Start an emergency fund. If you do decide to go with a high deductible, it would be in your best interest to tuck away some savings each month in case you end up having to pay for damages out of pocket. It’s all about being proactive about your protection!

At the end of the day, part of choosing a deductible for your car insurance policy is ensuring it’s designed to fit what you’re comfortable with. Talk with your American Family Insurance agent about finding the right range, and don’t be afraid to ask questions! We’re here to help make the process easier, affordable and personalized just for you.

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