Understanding your car insurance deductible

Tyler Wade
by Tyler Wade June 19, 2020 / No Comments

A deductible is the portion of the claim you pay before your car insurance company pays the rest. 

That’s simple, but there are complexities you should know about, too. How do car insurance deductibles work? Is there a change to your deductible for car insurance in an at-fault claim? What is a collision deductible? A comprehensive deductible? A lot of questions, let’s get to those answers.

What is a car insurance deductible?

A car insurance deductible is your out of pocket expense before receiving any insurance money.

There are no deductibles for liability in car insurance, but there are deductibles for comprehensive and collision coverage.

Comprehensive car insurance covers your car while it’s parked, and something damages it like lighting, a fallen tree, or hail.

Collision insurance protects your car if you’re in a crash and, at least partially, at fault. 

No-fault insurance means you’ll only ever deal with your insurance company. So, if you’re not at fault in a collision, your insurance company will work with the at-fault driver’s insurance company for the payout, and you’ll have no deductible to pay.

But, again, there’s more to unpack. Let’s look at the difference between comprehensive and collision in terms of their car insurance deductibles.

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Car insurance comprehensive deductible

Anytime you make a comprehensive insurance claim, you’ll pay the comprehensive deductible.

While it wasn’t your fault, a deductible keeps your car insurance premiums low for two reasons.

For one, the less your provider pays out, the more money they have in the bank. The more money they have available to manage claims, the more they can reduce a car insurance quote. 

A car insurance deductible also reduces the chance of someone submitting a claim. It doesn’t make sense to pay a $500 car insurance deductible to repair a $400 broken car window, especially if it’ll end up raising your insurance premiums. Your insurance company won’t let you make a claim for something less than your deductible, so no worries if you forget.

NOTE: You don’t have to pay a deductible for fire, lighting, or complete theft of your vehicle, in all provinces except Ontario and Quebec.

Collision deductibles, however, don’t always require a car insurance deductible payment.

Car insurance collision deductible

If you’re at fault in a collision, whether whole or in part, you’ll pay the deductible. Should the other driver be at fault, there’s no deductible to pay because it falls to the at-fault driver’s liability insurance. In provinces where direct compensation exists (car insurance in Ontario, Quebec, Nova Scotia, New Brunswick, and PEI), that section will handle the payout.

How much is my car insurance deductible?

Depending on your insurer, you can typically choose a rate from $250, $500, $1,000, or $2,000.

If they ask, the choice is yours, your car insurance deductible is a financial decision. The higher the deductible, the lower your premium, but you want to be sure you can pay the higher deductible if you need to make a claim. 

Your financial situation will change over the years, so at renewal adjust your deductible amount to fitl. Make it a habit to shop for car insurance quotes to ensure you’re getting good value from one of the best car insurance companies.

What’s a disappearing deductible?

A disappearing deductible (or vanishing deductible) is an endorsement you can add to your policy, which reduces your deductible by 20% for each consecutive year of claims free driving. In theory, after 5 years, there is no deductible to pay unless you make a claim, but you’re still paying for the endorsement. 

Aviva and Allstate are two companies that offer a disappearing deductible. TD insurance offers a 10% reduction for each year of claims free driving. 

Does a deductible apply if I have accident forgiveness?

Another endorsement, or add-on, to your car insurance policy, is accident forgiveness, which, if purchased ahead of a collision, promises to not increase your premium after an at-fault claim.

Accident forgiveness costs about $100 a year depending on your insurer, and yes, you still have to pay the deductible. Another problem is that if you switch insurance companies, the accident forgiveness doesn’t follow you, so you’ll have a hard time finding cheaper car insurance. It’s also only typically available to people who haven’t submitted a claim in 6 years.

What about zero deductibles?

You can buy an endorsement for glass coverage which means there is no deductible to pay for a broken car window or windshield replacement.

You might also see zero deductibles with rental car insurance. Depending on your credit card, and if you have rental car coverage, you likely don’t need the insurance. Check with your insurance and credit card provider before buying any insurance from a rental company.

The bottom line

Understanding your car insurance deductible helps you make a smart financial decision when you compare car insurance. If you can afford to pay a higher deductible when making a claim, then take the opportunity for a cheaper premium. Otherwise, find a balance in your car insurance deductible that makes sense for you. Oh, one last thing, if you’re leasing your car, the loan company will require you to have both comprehensive and collision on your insurance and they may stipulate the amount of coverage. Make sure to read the fine print and get the coverage you need.  

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