What is an Auto Deductible?

What is a car insurance deductible, different levels, making changes, and why the comprehensive deductible is different.

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Insurance is not only a business of statistics – it’s a business of terminology as well. Learning insurance jargon is a big part of  insurance education.

One of the most important of these terms is “deductible.” Especially in auto insurance, it comes up again and again. Every insurance agent needs to know it inside and out. That’s a good idea for everyone else as well.

What is a Deductible?

In simplest terms, a deductible is predetermined amount that you agree to pay on any claim before the insurance company kicks in. Deductibles feature prominently in just about all property and casualty insurance lines, including homeowners, commercial and inland marine policies in addition to auto insurance.

Different deductibles often apply to different insurance coverages, even within the same policy. For example a typical full coverage auto insurance policy may feature a $500 collision deductible and a $100 comprehensive deductible at the same time.

Deductibles in Auto Insurance Policies

Usually deductibles in auto insurance policies apply to the full coverage lines, namely collision and comprehensive. While exact offerings vary from company to company, auto insurance deductibles are generally available in $0, $100, $250, $500 and $1,000 levels.

Higher deductibles are occasionally found in commercial auto policies, but for personal auto policies the $1,000 deductible is usually the highest available. The $1,000 deductible is also usually the upper limit allowed by auto loan creditors, or “lienholders.” Lienholders contractually require full coverage insurance until the car is paid off.

As it implies, a $0 deductible means the insurance company pays for everything on a full coverage claim. (Unless they find an exclusion in the policy). The true full coverage option is also the most expensive. Because of this the $0 deductible is not very common.

Making Change to Deductibles

Remember, the higher the deductible the lower the premium. In order to maximize cost savings many people choose the highest deductible available. This is usually $1,000. While this is fine if you’re comfortable with paying up to $1,000 for each and every claim, it can cause gaps in coverage.

For example, if you receive a repair bill for $750 on an otherwise covered event, because you have a $1,000 deductible there’s effectively no coverage. When choosing deductibles to lower your premiums, choose the highest one you’re comfortable with then go no higher.

Deductibles can be changed at any time and for any reason. There’s no need to wait for policy renewal. All you have to do is contact your company and request it. Don’t worry about putting them off; they do this sort of thing all the time.

Just remember that any changes made can’t be undone when you have an accident. If you changed your collision deductible from $100 to $1,000 yesterday and had a minor $750 accident today, it’s too late to change your mind. You can get the $100 back for tomorrow, but you’re stuck with the $1,000 deductible today.

The Comprehensive Deductible

Comprehensive deductibles are usually available in the same levels as collision deductibles, but many people choose lower comprehensive deductibles. Comprehensive claims are typically much smaller than their collision counterparts. They also often don’t count towards future premium ratings.

You could theoretically file a comprehensive claim every day and never see your auto insurance rates go up (We don’t recommend actually doing that – it’s likely to generate unwanted attention).

In addition many companies offer a different deductible scheme for auto glass claims, which are by far the most common comprehensive insurance claim. Auto glass deductibles of $0 are often quite reasonable, and sometimes even included in the policy. Make sure you know what’s available for auto glass coverage when considering your comprehensive deductible.