Insurance 101: Understanding Auto Insurance Deductibles

Row of Cars, Vehicles, Mercedes-Benz

Insurance 101: Understanding Auto Insurance Deductibles

What is a deductible? This is a very common insurance question and probably the easiest to explain: An auto insurance deductible is what you pay “out of pocket” on a claim. As an example, if you have a $500 deductible and $4,000 in damage from a covered accident, you are only responsible to pay $500 for repairs. Your insurance would pay the remaining $3,500.

How Deductibles Work

Your auto deductible comes into play each time you file a claim. If you total your car, your insurance will provide payment for the vehicle’s current value, minus your deductible. So, if your car is worth $25,000 and your deductible is $1,000, you will receive a payment of $24,000.

However, if the damage to your vehicle amounts to less than your deductible amount, then your insurance would not provide payment. Say you had a $1,000 deductible but you only suffered $750 in damages, you would be fully responsible for the repairs.

What Types of Coverages Require a Deductible?

Your standard liability coverage, which covers the cost if you damage someone else’s property or injure someone with your car, never requires a deductible. Insurance coverages like comprehensive, collision, personal injury protection (PIP) or uninsured/underinsured typically carry a deductible. You can always find your deductible listed on your policy declaration page.

Choosing A Deductible That is Right for You

Auto deductibles are flexible and tend to range from $500 to $2,000. There is no right or wrong deductible, it comes down to what you feel more comfortable with:

Higher deductible = lower car insurance rate and higher out-of-pocket costs

Lower deductible = higher car insurance rate and lower out-of-pocket costs

The most common deductible selected by our drivers is $500. The most important factor is to ensure you are able to afford the deductible in the event of a claim. Be sure to consider the value of your vehicle before making a final decision. If your car is only worth $1,100, for instance, then it probably wouldn’t be the best choice to choose a high deductible like $1,000. 

Your Rockford Mutual Independent Insurance Agent will help you select a deductible that makes the most sense for you:

Get a Quote

Amy Casey
Social Media & Communications Specialist
Amy joined Rockford Mutual in January of 2017 with an Associates Degree in Marketing. Amy has a great understanding of insurance in general as she has obtained her Associate in General Insurance designation.