What is a car insurance collision deductible?
When you buy an auto insurance policy, you can add an optional collision coverage that can cover damage to your car. The collision deductible is the amount you agree to pay out of pocket to repair or replace your vehicle, while your insurance company covers the rest of the covered costs.
How collision deductibles work
Your collision deductible applies once your insurance company has approved your claim and issued a payout. The deductible is typically subtracted from the claim payout since it represents the amount you'll pay to repair or replace your vehicle. For example, imagine you hit a telephone pole and need $1,200 in repairs. If your deductible is $200, your insurance company will issue a payment to you or your chosen repair shop for $1,000, rather than $1,200.
There are other car insurance coverages that include a car insurance deductible, including comprehensive and uninsured motorist property damage coverage (depending on the state). Some insurers also offer disappearing deductible programs that reduce your collision and comprehensive deductible over time if you don't have any claims or moving violations
How much should your collision deductible be?
Collision deductibles vary widely — from as little as $100 to as much as $2,000. Unfortunately, there's no one-size-fits-all answer for how much is the right amount. It depends on your financial situation, driving habits, and what kind of car owner you are. To start, you should consider how much you could afford to pay out of pocket if you get in a car accident, and how your car insurance rate may change.
A lower deductible means a higher car insurance rate. If you're OK with paying more on car insurance but concerned about large, unexpected repair bills, a lower deductible might be right for you.
A higher deductible means a higher out-of-pocket cost when you file a collision claim, but you also get a lower car insurance rate. If you'd like to save money now and you're confident you could afford a larger, one-time expense if you have an accident, a higher deductible might be a better fit.
What else should I consider when choosing my collision deductible?
How much your car is worth
As your car depreciates, having a high collision deductible may make less sense. Your vehicle's actual cash value is typically the maximum amount your insurance company will pay for a collision claim. So if your car is only worth a bit more than your deductible, your potential claim payout is significantly lower.
Example:If you have a car valued at $2,000 and a $1,500 deductible, the most your collision coverage can pay out is $500 — the value of your vehicle minus your deductible. On a car worth $10,000 with the same deductible, you might get as much as $8,500.
How much coverage you want
With a lower deductible, your collision coverage may be more likely to cover lower-cost repairs, such as cosmetic damage like dings or dents. With a higher deductible, your insurance typically covers more expensive repairs that affect your vehicle's performance or safety. If you're not worried about paying for minor repairs yourself, then a higher deductible might be the right choice for you.
How much risk you're comfortable with
If you're a confident driver with a long record of accident-free driving, you may opt for a higher collision deductible. You have protection against larger repair bills, but your car insurance rate will be slightly lower.
On the other hand, if you're a newer driver or if you've had accidents in the past, then a lower collision deductible may make sense so you can lower your out-of-pocket repair costs. Your rate will be higher, but if you anticipate filing a claim, it may be worth the peace of mind knowing you may not have to pay as much for repairs.
More about insurance deductibles
If you're still unsure about the right amount for your collision deductible, learn more about insurance deductibles or try our car insurance calculator to estimate the right collision deductible for you.