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How Do Car Insurance Deductibles Work?

By the Mercury Team

Whenever you're buying car insurance or filing a claim, the term “deductible” has probably come up, and maybe you’re unsure what it is or how it works. We’ll dive deeper into deductibles and why they’re an important factor when determining your monthly premiums and out-of-pocket expenses.

What Is a Car Insurance Deductible?

A car insurance deductible is an out-of-pocket amount you pay towards a claim. Unlike health insurance, there’s no annual deductible to meet. You must pay your auto insurance deductible every time you file a claim if the damages exceed the deductible amount.

“When choosing your deductible, ask yourself ‘can I afford this if I have an accident?’ If the answer is no, consider a lower deductible.” - Kevin Quinn, VP, Claims

How Do Car Insurance Deductibles Work?

Insurance providers use deductibles to help minimize their risk. Paying a portion of the claim upfront shows your insurance company that you’re not filing a frivolous claim and genuinely need financial support. After you pay your deductible, your insurance provider will cover the rest of the expenses.

For example, say you have a $500 deductible and a $2,500 car repair bill from a covered accident. You’ll pay $500, then your insurance provider will cover the remaining $2,000.

Types of Car Insurance Coverage

Depending on your policy, there may be deductibles for different types of car insurance coverages, which include:

  • Liability ProtectionLiability protection helps you financially if you’re found legally responsible for causing injury or property damage to another person in an accident. You won’t pay a deductible for this coverage.
  • Collision ProtectionCollision protection covers your vehicle from accidents, no matter who’s at fault. This insurance almost always has a deductible.
  • Comprehensive CoverageComprehensive coverage helps protect your vehicle from damages outside of your control, such as floods, fires, falling objects, and vandalism. This coverage typically has a deductible.
  • Medical Payments CoverageMedical payments coverage helps cover your medical expenses following an accident. This coverage usually has no deductible.
  • Personal Injury Protection (PIP)Personal injury protection helps cover medical costs and other expenses for you and your passengers, regardless of who’s at fault for the accident. This coverage often has a deductible.
  • Uninsured/Underinsured MotoristsUninsured/underinsured motorist coverage helps cover medical bills or property damage costs if you’re involved in an accident with an uninsured or underinsured driver. The bodily injury coverage usually doesn’t have a deductible, but the property damage coverage often has a deductible.

High Deductible Vs. Low Deductible

Generally, you can choose how much you want to pay for your deductible. The most common deductible amount is $500, but many insurance providers offer deductibles ranging from $100 to $2,000.

Here are the important factors to consider when selecting a deductible:

  • Check your savings or emergency funds and figure out how much you can comfortably pay out of pocket following an accident.
  • Review your driving history and determine the likelihood of filing a claim. For example, if you’ve been in accidents before and often drive on busy roads, you might be more likely to file a claim and pay a deductible.
  • Determine how much a higher deductible would reduce your premiums, and how much a lower deductible would cost per month.

How Will Your Car Insurance Deductible Impact Your Rate?

Whether you choose a lower deductible or a higher deductible, it can affect your car insurance rates. Generally, you can expect the following to happen:

  • Lower deductible = Lower out-of-pocket expenses but higher car insurance rates

  • Higher deductible = Lower car insurance rates but higher out-of-pocket expenses

If you have the financial means to account for out-of-pocket expenses following an accident, consider bumping up your deductible to help reduce your monthly premiums. According to the Insurance Information Institute, increasing your deductible from $200 to $500 can lower your collision and comprehensive coverage costs by 15% to 30%. Also, choosing a $1,000 deductible could save you 40% or more monthly premiums.

When Do You Pay the Deductible for Car Insurance?

You have to pay a deductible any time you make a claim under a coverage that carries a deductible, provided the damages exceed the deductible amount. Typically, your insurance provider subtracts the deductible amount from your claim’s approved payout, meaning you usually don’t have to make a payment to them. For example, suppose you have a claim that’s approved for $5,000 and you have a $1,000 deductible. In this instance, your insurance provider will send you a check for $4,000.

Do You Pay a Deductible If Not at Fault?

It depends. If the other driver is found responsible for the accident, you can file a claim with their insurance company to cover your repairs, meaning you won’t have to pay your deductible. You can also choose to file a claim through your insurer with your collision protection coverage. However, you’ll likely have to pay a deductible if you choose this route.

Additionally, if you get into an accident with an uninsured or underinsured driver and they’re at fault, you still may have to pay a deductible with your uninsured/underinsured motorist coverage.


Understanding how car insurance deductibles work and knowing how much you can afford may help you get the right coverage at the right price. If you choose a lower deductible, you won’t pay as much out of pocket, but you can expect higher monthly premiums. On the other hand, opting for a higher deductible can help reduce your car insurance rate, but at the expense of higher out-of-pocket costs.

If you’re looking for affordable car insurance, consider Mercury Insurance, where we provide best-in-class coverage at great rates.

Contact us for a fast, free quote today!

Mercury Team

The Mercury Marketing Team is made up of professionals in the fields of Content Creation, Public Relations and Social Media. The team works together to deliver professionally written and researched content to provide information for consumers.

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