What is an auto insurance deductible? (Guide 2022)


When you have a car accident and your car needs repairs, you will have to pay a certain amount of money before the insurance company pays for the damage. This amount of money is called an auto insurance deductible. In this guide, we’ll explain what a franchise is, how it works, and how to choose one.

Our research team reviewed best car insurance companies around you to help you find the right supplier for your needs. Before choosing a font, compare auto insurance quote from several suppliers.

What is an auto insurance deductible?

A car insurance deductible is the amount of money you pay out of pocket before your insurance company covers damages or medical expenses after an accident. You don’t pay the deductible to your insurance company, but rather to the repair shop that fixes your car or to the doctor’s office that treats you.

As an example, let’s say you have a deductible of $500. If you file an insurance claim that results in a $5,000 repair job, you’ll have to pay $500 for any repairs or other damage before the insurance company pays the remaining $4,500. If your claim is less than your deductible, you will be liable for the full amount.

Health Insurance Deductibles Vs. Car Insurance Deductibles

Health insurance deductibles are reset each plan year. The money you spend out of pocket on healthcare services adds up, reducing your deductible. Once you have reached your deductible amount, the health insurance company takes care of the payments. The deductible amount is reset in the new plan year.

With auto insurance, you pay your deductible amount each time you file a claim. There’s no limit to the number of times you pay your deductible per year, and out-of-pocket expenses don’t accumulate over time. You will also have different deductibles for different types of coverage. If you file a claim on your collision coverage, you will have to pay a different deductible than if you file a full coverage claim.

How does an auto insurance deductible work?

When purchasing an auto insurance policy, you will be able to choose the amount of your deductible. The amount of your deductible will change the amount of your insurance premium. If you choose a higher deductible, you will pay a lower premium. The reverse is also true: a lower deductible means a higher premium.

What is the average car insurance deductible?

Typically, auto insurance deductibles range from $500 to $2,000. The most common deductible amounts are:

Many insurers set the default deductible at $500, although some people opt for lower or higher deductibles depending on coverage.

If you live in an area with high rates of vandalism or property theft, you may want a lower overall deductible. This would help you pay less out of pocket if you file a claim. To keep your total car insurance premium affordable, you can then opt for a higher collision deductible and pay less per month.

What is a dying franchise?

A vanishing deductible, sometimes called a “vanishing deductible” or “decreasing deductible”, is a program offered by some insurance companies to reward safe drivers. The longer a driver goes without filing a claim, the lower the deductible on their insurance policy.

If you have a vanishing deductible, you earn a credit on your deductible — typically $50 to $100 — each year without claims, policy lapses, or certain violations. The four largest companies currently offering vanishing franchises are:

What types of auto insurance have deductibles?

No matter what state you live in, collisions and full coverage will have deductibles. Liability insurance has no deductible. Deductibles for other major types of coverage vary from state to state.

The table below lists the common types of car insurance, the basic details of each coverage and whether or not it carries a deductible.

When buy car insurance, check your state’s insurance guidelines for any deductibles you may have to pay. Some types of coverage, such as PIP, are not available in all states, but are required in no-fault states. For example, Utah requires PIP but does not allow deductibles for PIP policies.

When do I have to pay a car insurance deductible?

Here are the most common scenarios where you would be required to pay a deductible:

  • You are the driver at fault in a collision: You will have to pay your collision deductible on the insurance claim.
  • You file a global complaint: You will pay a deductible if your car is damaged by fire, flood or other natural disaster. Although Complete Windshield Replacement covers replacement of the windshield, some insurance companies may waive your deductible if the glass can be repaired rather than replaced.
  • You file a PIP claim: All non-fault states require PIP. Some no-fault states require you to pay a deductible, but Utah does not allow deductibles on PIP policies.
  • You file an uninsured motorist claim: There are two types of uninsured motorist coverage: bodily injury (UMBI) and property damage (UMPD). Most UMBI policies do not have a deductible, but UMPD may require one. In this case, you may have to pay a deductible on a UMPD claim before the insurer covers the damage.

If you are found not at fault in a car accident but processing the other party’s insurance claim is taking too long, you can file a claim with your own insurance company. You may have to pay a deductible to get your car repaired, but then you can sue the other party to get your deductible back.

When do I not pay a deductible?

The most likely situations in which you would not pay a deductible are:

  • Another driver is convicted: If another insured driver hits you and damages your vehicle, you won’t have to pay a deductible until an insurance claim covers repairs to your car. Deductibles only apply when you file a claim with your own insurance company.
  • You have a franchise that is disappearing: If you have earned enough credits to cover your disappearing deductible, you will not have to pay. Once you have used your Vanishing Franchise, there is usually a waiting period before the program restarts.

How to choose an auto insurance deductible?

When choosing a deductible for your auto insurance policy, it’s important to understand your financial situation. If you want to lower your insurance premium and have the income to cover your deductible after a loss, it may be a good idea to choose a higher deductible.

If you cannot afford a high deductible, choosing a low deductible will keep your out of pocket to a minimum. However, this will also result in a higher bounty.

Recommendations for car insurance

Our team researched the best insurers in the country. Before choosing an insurer, compare car insurance policies to find what best suits your budget and needs. We recommend that you start your search with Geico and progressive.

Geico: Best for Discounts

We have found that Geico has some of the most affordable auto insurance rates around. It’s the second-largest insurer in the United States, and that’s likely thanks to its high policy limits and wide variety of discount opportunities.

Geico holds a Financial strength rating A++ by AM Best and a A+ rating from the Better Business Bureau. The insurer offers all six types of standard car insurance coverage as well as additional options such as rental car reimbursement and ride-sharing insurance.

Read more: Geico Review

Progressive: better insurance based on usage

Progressive is the third-largest insurer in the country. The company has a simple auto insurance quotes process and a popular mobile app, helping it build a great reputation in the insurance industry.

Progressive also has Snapshot, a usage-based insurance program that monitors your driving habits and rewards safe drivers. The company offers a full range of standard coverage options, add-ons and additional insurance products.

Read more: Progressive examination

How we rate insurers

Our review process aims to provide consistent and unbiased ratings of car insurance providers. While there are multiple qualities that make a successful auto insurance company, our review team focuses on the ones we believe are most important to consumers:

  • Cost: The cost can be difficult to compare between insurers because many factors affect annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we review insurance rate estimates generated by Quadrant Information Services, rebate opportunities, and consumer reports.
  • Cover: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits such as roadside assistance.
  • Reliability: It is important for an automobile insurer to be able to meet its claims obligations. Companies whose financial strength is rated by AM Best achieve the best results in this category. Established insurers with a long history of reliable service also receive positive ratings.
  • Service: We scour customer reviews on sites like the Better Business Bureau (BBB) ​​to learn more about customer experiences. Insurers with low complaint volumes perform well in this area. We also take the claims process into account, giving higher ratings to auto insurers that offer easy-to-use claims apps.

*Data correct at time of publication.


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