Car Insurance Deductible: How It Works

You get into an accident, take your car in for repairs and then find out you’re responsible for part of the bill. That amount may be your car insurance deductible, or what you pay out of pocket before your insurance may help pay for a covered claim. Deductibles most commonly come into play with collision and comprehensive coverages, while liability coverage generally does not have one. Here’s an important detail: Your deductible typically applies to each claim, not once per year. So, if you have more than one covered claim where a deductible applies, you may have to pay it each time. 

Kemper Auto offers auto insurance options to help drivers find coverage that fits their driving needs and budget. Understanding how deductibles work can help you make informed decisions about your coverage. Here is what to know about when deductibles apply, how they affect premiums and what to consider when choosing an amount. 

What is a Car Insurance Deductible? 

Simply put, it is the amount you agree to pay toward a covered claim before your insurance policy extends coverage for a covered claim, subject to your policy terms and limits. One of the biggest considerations is how much you could comfortably pay after an unexpected, covered loss. 

A deductible is different from an insurance premium. Your premium is the amount you pay for your insurance policy, while your deductible is an out-of-pocket expense associated with certain covered claims. 

Your policy documents can provide details about your deductible and when it applies. Resources from the Insurance Information Institute can also provide additional information about insurance deductibles. 

How Does a Car Insurance Deductible Work? 

If you are wondering how a car insurance deductible works, it may help to look at what can happen during the claims process. The exact process varies depending on the circumstances, insurer and policy, but it may generally include these steps: 

1. You file a claim. After an accident or another covered loss, you report the incident to your insurance company and provide information about what happened. 

2. The vehicle damage is reviewed. An adjuster may review the damage, repair estimate and other details to determine whether the loss is covered and what costs may be payable under your policy. 

3. Your deductible is applied. If your coverage includes a deductible for the claim, you are responsible for that amount. 

4. Insurance may pay the remaining covered costs. After the deductible is applied, your insurance may help pay the remaining eligible costs, subject to the terms and limits of your policy. 

5. Some claims may not require a deductible. Whether you have a deductible depends on the coverage involved, your policy and, in some cases, state requirements. 

Here are two examples of how this could work: 

1. The repair costs are higher than the deductible. You have a $500 collision deductible and $2,500 in covered repair costs. You would generally pay $500, and your insurer may pay the remaining $2,000, depending on your policy and limits. 

2. The repair costs are lower than the deductible. You have a $500 deductible, but the repair costs are $400. Because the repair costs are less than the deductible, you would generally be responsible for the full $400, and filing the claim generally would not result in an insurance payment. 

Understanding your deductible before a loss occurs can help you know how much you might need to pay out of pocket following a covered claim. 

Car Insurance Deductible Options Explained: Choosing the Right Amount for You 

Common deductible options may include $250, $500 and $1,000, although other amounts may be available depending on the insurer and policy. 

Consider several factors when selecting a deductible: 

• Your budget: Think about both your insurance premium and how much you could reasonably pay following a covered claim. 

• Your emergency savings: Consider whether you could pay your deductible on short notice without putting too much strain on your finances. 

• Your vehicle's age and value: The value of your vehicle may influence how you approach your deductible and coverage choices. 

• Your driving habits: How frequently and how far you drive may be factors to consider when reviewing your coverage. 

• Your comfort with financial risk: A higher deductible shifts more of the initial cost of a covered claim to you. 

Higher versus lower car insurance deductibles 

Lower deductible 

• Less money to pay out of pocket when a deductible applies 

• Generally associated with a higher premium 

• May appeal to drivers who want a smaller unexpected expense after a covered claim 

Higher deductible 

• More money to pay out of pocket when a deductible applies 

• Generally associated with a lower premium

• May appeal to drivers who have savings available to handle a larger unexpected expense 

When considering a $500 versus $1,000 deductible, think beyond the monthly premium. A $1,000 deductible may generally result in a lower premium than a $500 deductible, but you will also take on an additional $500 of potential out-of-pocket costs if a covered claim requires you to pay the full deductible. 

Deductibles generally apply per claim rather than per policy year. If you have two separate covered collision claims during the same year and your deductible applies to both, you would typically be responsible for the deductible on each claim. 

There is no single deductible amount that works for every driver. The right choice depends on your finances, vehicle, coverage needs and comfort with risk. 

When Do You Pay a Car Insurance Deductible? 

Whether you pay a car insurance deductible depends on the type of coverage involved and the circumstances of the claim. 

A deductible typically applies to: 

• Collision coverage: Collision coverage may help pay for covered damage to your vehicle resulting from a collision with another vehicle or object, depending on your policy. 

• Comprehensive coverage: Comprehensive coverage may help pay for certain covered losses that do not involve a collision, which may include theft, vandalism, fire, hail, falling objects or an animal collision. 

• Glass claims: Deductible requirements for windshield and other glass claims can vary by policy and state. Some policies or states may provide options for glass coverage with no deductible. 

A deductible usually does not apply to: 

• Liability coverage: Liability insurance generally does not require you to pay a deductible before the policy pays covered damages to others, subject to policy terms and limits. 

• Claims paid by another driver's insurer: If another driver is found at fault and their insurer accepts liability, you may not have to pay a deductible for repairs handled through that driver's coverage. 

• Certain optional coverages: Some additional auto insurance coverages may not have a deductible, depending on the policy and state. 

The situation may be different if another driver causes an accident. If you decide to file a collision claim through your own insurance, you may have to pay your collision deductible initially. If your insurer later recovers money from the at-fault driver's insurer through a process known as subrogation, you may receive reimbursement for some or all of your deductible. The subrogation process may vary by insurance carrier, so it’s important that you speak with your claims adjuster and ask any necessary questions regarding your claims payments. 

Coverage terms, deductibles and claims processes vary. Reviewing your policy can help you understand how collision and comprehensive coverage may apply to your vehicle. 

How Does a Car Insurance Deductible Affect Your Premium? 

Your deductible and insurance premium are related because they determine how costs are divided between you and your insurer after certain covered losses. 

Generally, choosing a higher deductible may result in a lower insurance premium. By accepting a larger portion of the initial cost of a covered claim, you are taking on more financial responsibility. 

A lower deductible generally works in the opposite direction. Your out-of-pocket responsibility after a covered claim may be smaller, but your insurance premium may be higher. 

For example, choosing between a $500 and $1,000 deductible means considering two types of expenses: The predictable cost of your insurance premium and the potential out-of-pocket cost of a future covered claim. 

Premium differences can vary based on the insurer, state, vehicle, driving history and other individual rating factors. Raising your deductible does not provide a guaranteed amount of savings. 

When choosing a car insurance deductible, consider how much you could comfortably pay for a covered claim. 

The National Association of Insurance Commissioners also offers consumer resources that can help drivers learn more about auto insurance, deductibles and premiums. 

Why Choose Kemper Auto as Your Auto Insurance Company 

Kemper Auto  is the brand name for the companies that offer insurance under the Kemper family of companies. It offers auto insurance coverage options for a range of budgets and driving needs and has over $11 billion in assets. Drivers can work with local independent agents, with Spanish-bilingual service in most areas, to discuss available coverage options and deductibles. Coverage options and availability vary by state. 

Frequently Asked Questions About Car Insurance Deductibles 

Do you pay a deductible if another driver caused the accident? 

If the other driver is found at fault and their insurer accepts liability, you may not have to pay your deductible. If you file through your own collision coverage first, you may pay the deductible up front for your car repairs. Your deductible may later be reimbursed if your insurer recovers the costs from the at-fault driver's insurer through the subrogation process. 

Is a $500 deductible or a $1,000 deductible better? 

The right deductible depends on your budget, savings, vehicle value and how much financial risk you are comfortable assuming. A $1,000 deductible generally may result in a lower premium than a $500 deductible, but it also means you could pay more out of pocket when the deductible applies. 

Does liability insurance have a deductible? 

Liability coverage generally does not require you to pay a deductible before your insurance company pays for covered damages to others when you are found at fault, subject to the terms and limits of your policy. 

Can I change my deductible? 

In many cases, yes. You may be able to adjust your deductible when purchasing or renewing your policy or after discussing available options with a licensed agent. Changing your deductible will typically affect your premium. 

Does a deductible apply every time I file a claim? 

Auto insurance deductibles generally apply per claim rather than per year when the applicable coverage carries a deductible. If you file two separate covered claims during the same policy period and the deductible applies to each one, you would typically be responsible for the deductible twice. 

Learn More About Your Car Insurance Coverage 

Take a look at your current policy or declarations page to see your car insurance deductible and consider whether it still fits your budget and driving needs. If you would like help reviewing your options, a licensed agent can discuss available deductible and auto insurance coverage choices with you. 

Kemper Auto offers auto insurance options for different budgets and driving needs in eligible states. Coverage, options and availability vary by state.