Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 8, 2020

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Here's what you need to know...

  • When you carry physical damage coverage, you must select a deductible for both comprehensive and collision
  • The deductible is the amount of money that the policyholder is obligated to pay before the company will pay a claim
  • You are required to carry physical damage coverage on financed or leased vehicles
  • The lower the deductible, the higher the premium for the coverage
  • You should weigh the cost of the damage coverage and the amount of the deductible to select a reasonable amount


A full coverage auto insurance policy doesn’t actually afford full coverage to the policyholder. While every policy is different, no car insurance policy will provide you with coverage for absolutely every type of loss.

Instead of paying for all of the losses that are claimed against a policy, the insurer will ask the named insured and vehicle owner to choose how much money they’re willing to pay when a future claim is filed.

One thing that many drivers don’t understand is that deductibles aren’t one-size-fits-all.

You’ll need to consider your driving record, your risk classification, your vehicle type, the vehicle value and ultimately your budget to make the best selection.

If you’d like to learn more about when you’ll pay a deductible and how to select a reasonable one, read on and find out all you need to know.

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Table of Contents

What is a deductible?

Insurance companies want to share risk with their customers who carry policies.

To share the risk, the company will have their named insured select a deductible for specific types of optional coverage types that are selected.

Your claim must exceed the deductible amount for the insurer to be on the line to pay and you’re responsible for paying out-of-pocket for that amount and the insurer will pay the remaining costs.

A deductible is the amount of money you’ll pay when you’re filing an insurance claim.

Your claim must exceed the deductible amount for the insurer to be on the line to pay and you’re responsible for paying out-of-pocket for that amount and the insurer will pay the remaining costs.

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Where do deductibles apply?

You don’t share the risk for every coverage listed on your policy. There are coverage options that require deductibles and there are options that don’t.

For auto insurance, you’ll only be asked to select a deductible for comprehensive and collision coverage for physical damage to your covered auto.

You’ll be able to select different amounts for each coverage type, but your collision deductible can’t be lower than the deductible that you select for comprehensive losses.

Understanding How Car Insurance Deductibles Work

Before you select a deductible, you’ll want to know when you’ll be responsible for paying that amount.

This is the only way to truly select a reasonable figure that’s fair and manageable.

When your deductible will be charged depends entirely on the type of claim that you’re filing and who’s considered at-fault.

Here’s a breakdown so that you know what to expect:

–Comprehensive Deductibles

Comprehensive coverage pays for non-fault and non-moving losses. On your policy, you’ll find a list of ‘perils’ that comprehensive coverage will pay for.

Some of these include fire, theft, vandalism, glass breakage, falling objects, and explosion.

If you file any types of these claims, your ‘comp’ deductible will apply.

In some instances, your deductible will be waived to pay for glass repairs.

–Collision Deductibles

Collision coverage gets a bit more complicated. This is because there are cases where you could be considered not at fault for a loss and still asked to pay your deductible.

In simple cases of a collision, where it’s obvious who is at fault, your collision deductible is waived because the other party’s insurance will pay.

In more complex cases, however, you may be asked to pay until the claim is settled so that your repairs can be made right away. This also happens when you’re hit by an uninsured driver.

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Do you need physical damage coverage?

Not everyone needs physical damage coverage. The only time that comprehensive and collision is actually required is when you’re under contract with a lessor or a lender.

Since the leasing company or finance company is the legal owner of the vehicle, they’ll write into the contract that you’re required to maintain full coverage auto insurance.

It might even say that you’re only allowed to carry deductibles up to a certain limit to be sure you can pay to have damages repaired.

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Do paid-off cars need physical damage coverage?

If your car is paid off and you hold the title, it’s entirely your choice as to whether you need damage coverage and what deductible you want to carry.

Typically speaking, you should consider the value of the vehicle in the eyes of the insurer and how the model retains its value when you’re deciding.

If your car is an older model and has a salvage title, it might not make sense to buy damage coverage because it’s likely the company won’t pay.

How are cars valued by the insurance company?

Before you assume that you’ll get what you pay for under comprehensive or collision, you’ll need to understand that you might believe your car is more valuable than the insurer.

Insurance companies go off of fair market value or actual cash value when valuing vehicles.

The depreciation and values reported in the local area will all be factored in.

Another important note is that cars with lower values can easily be totaled because the damage will have exceeded the insurer’s valuation of the car itself.

So you should always think twice before buying expensive coverage on an inexpensive vehicle.

What are the options when choosing a deductible?

All companies offer a different menu of deductible options.

In most cases you can choose between the following with some limitations:

  • $50
  • $100
  • $200
  • $250
  • $500
  • $750
  • $1000

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How will your deductible affect rates?

How your premiums are affected by your deductible depends on your risk class.

If you’re a high-risk driver with accidents or little experience, a low deductible will cost a large amount of money.

If you’re a good driver, lowering your deductible won’t make much of a difference.

What is the common rule of thumb?

There are many rules of thumb surrounding deductibles. One that’s respected is that you shouldn’t carry collision if the percent of your car’s fair market value.

When this happens, you’ll be better off self-insuring for physical damage claims.

Be sure that you only select a deductible that you can reasonably pay when you experience a loss.

It’s tempting to select high deductibles, but if you do you should always be sure to put away what you’re saving so that you can cover your portion when filing a claim.

If you’d like to price the cost of full coverage, you can use an online price comparison tool to see what each insurer will charge you for each different deductible.

Start comparing auto insurance rates now by entering your zip code in our FREE tool below!

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