What does deductible mean in car insurance?

A deductible is the amount of money you pay out of pocket to cover a claim. It's a key feature of many types of insurance coverage. A car insurance deductible is what you pay “out of pocket” on a claim before your insurance covers the rest. Collision protection, all-risk, coverage for uninsured and personal injury drivers typically have an auto insurance deductible.

You can generally choose between a low deductible and a high deductible. A low deductible means a higher insurance rate, while a high deductible means a lower insurance rate. The car insurance deductible is the amount of money you must pay when you file a claim for an insured loss. Basically, when you have a car accident and file a claim, the payment of your claim will be reduced by the amount of your deductible.

A deductible is the amount of money you are responsible for paying to cover an insured loss. When a disaster occurs in your home or if you have a car accident, the deductible is subtracted or deducted from what your insurance pays to cover a claim. Deductibles are how risk is shared between you, the policyholder and your insurer. If your car insurance deductible is greater than the cost of damage to your vehicle, you'll pay the full cost out of your pocket, since the insurer only covers damages that exceed the amount of the deductible.

You can opt for a higher car insurance deductible because you're betting against having an accident, but if you've had accidents in the past and drive often on higher-traffic roads, you're more likely to file a claim and pay a deductible. If you live in a state where cracked windshields are common, you might want to choose a low car insurance deductible to replace your windshield. After you pay the amount of the car's deductible, your insurer will cover the remaining cost to repair or replace your vehicle. Understanding the role deductibles play in insuring a vehicle or home is critical to getting the most out of your insurance policy.