Understanding Auto Insurance Deductibles & How They Work

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 have the ability to 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.

What Deductible Should I Choose?

Typically, people choose an auto insurance collision deductible of $250, $500 or $1,000. Comprehensive deductibles are usually $100, $250 and $500 — although a $0 deductible is available. American Family Insurance offers auto insurance collision deductibles and comprehensive deductibles in these amounts.

Let’s talk about deductibles. What are they and why do they matter? Your car insurance is designed to protect you financially if you get in an accident. But before your insurance kicks in to pay for the covered damages, you’ll have to pay a portion of the loss. This out-of-pocket amount is called the deductible. The dollar amount of your deductible varies based on the policy you and your American Family Insurance agent select together. But all deductibles work the same. You are responsible for a pre-specified amount of money up front, and then any covered cost above and beyond that are reimbursed by your insurance. Accidents happen, and when they do, we’ll be here to help you every step of the way.

Want to learn more about how deductibles work or what deductible amount is right for you? Your American Family agent is happy to help.

Deductibles With American Family Insurance

American Family Insurance makes it easy to set up your car insurance policy and choose a deductible:

Get covered. First step — you need car insurance! Get an auto insurance quote and purchase your coverage online, by contacting your agent or by phone at 1-800-MYAMFAM (1-800-692-6326).
Have your Information ready. When quoting auto insurance, you’ll need the names, addresses, dates of birth, numbers of accidents/violations for all drivers in your household and current insurance policies.
Choose your deductible. You can select a higher or lower deductible when setting up your car insurance. The deductible that’s best for you depends on your individual financial needs, so choose a deductible that works best for your budget.

Car Insurance Deductible FAQs

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.

Your auto insurance deductible is different than a health insurance deductible — there’s no annual amount that you have to meet. Instead, you’ll pay your deductible every time you file a claim under collision and comprehensive coverage.
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.
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.

My Premium

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My Deductible
You’ll pay your deductible when your claim is approved — but you won’t have to write a check or pay your insurer. Instead, your insurer will deduct your deductible amount from the payout of your claim.

For example, if your claim is approved for $4,000 and you have a $500 deductible, you’ll receive $3,500 from your insurance company for the claim.
Yes, you will usually have to pay a deductible under these circumstances. 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. In this case, you will still have to pay your deductible toward the covered claim.
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. However, you’ll still pay a deductible under your collision coverage to pay for repairs to your vehicle.
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.
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.
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.

Choosing Low Deductibles vs High Deductibles

Now that you know what a car insurance 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 Auto Insurance 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 Auto Insurance 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

Still not sure what deductible makes sense for you?

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Auto Deductibles: Example Scenarios

Low Deductible Scenario
High Deductible Scenario

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 Affordable Deductible Amount

Deciding whether 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 an auto insurance 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.