What Is an Auto Insurance Deductible and How Does It Work?

An auto insurance deductible is the amount you agree to pay out of pocket before your insurance coverage kicks in for a covered claim. For example, if you have a $500 deductible and your car sustains $2,000 in damage from a covered accident, you would pay the first $500, and your insurer would pay the remaining $1,500.

Deductibles typically apply to collision and comprehensive coverage, which protect your vehicle from accidents, theft, vandalism and other non-collision events. Liability coverage, which pays for damage you cause to others, does not have a deductible.

How Do Deductibles Affect Claims and Premiums?

Generally, a higher deductible means you’ll pay less each month for your policy, but you’ll pay more out of pocket if you file a claim. Conversely, a lower deductible increases your premium but reduces upfront costs after an accident.

When deciding whether to file a claim, consider your deductible amount. If the cost of repairs is close to or less than your deductible, it may not make sense to file a claim, as you’d be responsible for most or all of the expense.

Choosing the Right Deductible in California

Selecting the right deductible depends on your financial situation and risk tolerance. Here are a few tips for California drivers:

• Consider how much you could comfortably pay out of pocket after an accident.
• Think about your driving habits and the likelihood of filing a claim.
• Review how different deductible amounts affect your premium.

Our team can help you compare options and find a balance that fits your needs and budget. Contact us today to speak with our knowledgeable team and get personalized guidance.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.