A deductible is the amount you pay out of pocket on a claim before your insurance kicks in. Deductibles apply to collision and comprehensive coverage - not to liability.
How it works
If you have a $500 deductible and your car has $3,000 in collision damage:
- You pay the first $500.
- The insurer pays the remaining $2,500.
If the damage is less than your deductible, you typically pay the full repair cost and don't file a claim.
The tradeoff: deductible vs. premium
Higher deductible → lower monthly premium. Lower deductible → higher premium.
Common deductible amounts: $250, $500, $1,000, $2,000.
- Raising your deductible from $500 to $1,000 typically lowers your premium by 10–15%.
- The savings only pay off if you go several years without a claim.
How to choose
A reasonable approach:
- Estimate how much cash you could comfortably pay out of pocket today.
- Set your deductible at or below that amount.
- Only raise it if you have an emergency fund that can absorb the hit.
Per-claim, not per-year
Note that a deductible applies per claim, not per year. If you have two separate incidents in one year, you'll pay the deductible each time.