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Car Insurance Deductibles

Types of Car Insurance Deductibles

Your auto insurance protects you financially in the event of an accident, and it gives you peace of mind when you hit the road. But, if you’re in an accident, you’ll usually still be paying a little out of pocket — otherwise known as paying your deductible.

So, what is a deductible and how does it work? Let’s see how it comes into play when you face the unexpected.

What Is a Car Insurance Deductible?

A car insurance deductible is the amount that you must pay before an 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 steps in to help.

Let’s say you’re in a fender bender which causes $2,000 worth of damage to your vehicle. Your deductible is $1,000, meaning, before your insurance company helps cover any of the costs, you’ll be paying $1,000 out of pocket. Your insurance company will then pay the remaining $1,000 for damages.

When Do I Pay My Deductible?

It can be tricky to completely understand every instance you’ll be required to pay a deductible, but we’re here to help make it a little clearer. Here are a few circumstances where you might have to pay deductibles.

What happens if a tree branch falls on my car and damages it?

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, storm damage to name a few — is covered under your comprehensive coverage, and you’ll always have to pay a deductible under these circumstances.

Besides my deductible, do I pay for the other driver’s deductible if I’m at fault in an accident?

Actually, no. 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.

Do I have to pay a deductible if the accident was someone else’s fault?

If someone else is at fault, you’ll work with their insurance company to repair your car with no deductible. If the company is slow, or there is some kind of disagreement, your own collision coverage can cover repairs for the car, but in this case, you will pay a deductible.

Your insurance company will then contact the other driver’s company, and you’ll often get the full reimbursement for your deductible.

What happens if my car was damaged in a hit-and-run?

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. You will 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.

I hit a deer. I’ll probably have to pay a deductible, right?

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

Should I Have a Low or High Auto Deductible?

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. So, which one is right for you? To answer this question, it helps to understand how the price of your deductible affects your premium.

How the deductible affects the cost of your policy. 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 scenario. Your car was beaten up during a thunderstorm and a tree branch crashed down on the hood. You take your car to the mechanic and find out it’s going to cost $1,500 to fix. Since you chose a low deductible of $250 for your comprehensive coverage, you’ve been paying a little more each month for your premium, but now you’ll only be paying $250 out of pocket for the damage. Your insurance company covers the remaining $1,250.

High deductible scenario. Now, let’s say you hit a tree with your car, which is covered under your collision coverage. You chose a $1,500 deductible for your collision coverage because you wanted to pay less on your monthly premium. The estimate to repair the damages on your car is $1,500, but now you won’t even file a claim since your insurance provider won’t be covering any of the damages anyway — because you’ll be paying that $1,500 either way.

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’d 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.