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deductibles: the basics

deciphering these out-of-pocket insurance payments

Certain coverages come with deductibles that you can choose. A deductible is a payment you'll need to make out of pocket before your coverage kicks in. We'll explain what your deductible represents, when you'll need to pay it, and how to set your own at a level that's right for you.

A quick deductible debriefing

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In case you're new to car insurance deductibles or just want a refresher, let's first reestablish what they do. Your deductible is the out-of-pocket amount you agree to pay when you file a car insurance claim. Depending on the coverages you add to your policy, you could have one or several deductibles. And not all coverages have deductibles.

In general, the higher you set your deductible, the lower the cost of the coverage. That's because you're assuming more of the financial risk with a higher deductible.

Deductibles are typically selected with comprehensive coverage, collision coverage, and auto loan/lease (gap) coverage. In some cases, you'll also choose a deductible on personal injury protection coverage and on uninsured/underinsured motorist coverage.

Your liability coverages will have limits, but no deductibles.

How a deductible can work

If you're found at fault in a car accident and you have comprehensive and collision coverage, the first portion of your vehicle repairs are covered by your deductible — everything above that amount (and below the actual cash value of your car) is picked up by your insurer.

So if you're in a collision that causes $5,000 of damage to your car and you have a $500 collision coverage deductible, you'll pay the first $500 and your insurer will pay $4,500 after that (assuming your car's worth more than $5,000). But if your bill is $490, you'd cover it all.

Do you have to pay your deductible if you're not at fault?

It depends on how quickly and easily fault is determined after the accident.

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If the investigation takes a while and you'd like to get your car fixed in the meantime, you may need to pay your deductible out of pocket. If another driver's deemed at fault after you pay your deductible, we may embark on a process called subrogation.

Through subrogation, one insurer receives money from another insurer in order to reimburse you, the policyholder. If this process is successful, your deductible may be refunded.

Glass damage

Your comprehensive coverage may have a caveat for glass damage. If your windshield or a window breaks, you may not need to pay a deductible for us to help you get it fixed.

Find out more about glass-damage claims and comprehensive coverage.

Car theft

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Because vehicle theft falls under the umbrella of comprehensive coverage, you'll need to pay your deductible to get a cash settlement when the car isn't found. The value of the car at the time of the theft, or what we call its actual cash value, will be the amount of your settlement (minus deductible). This way you can buy a new or used car of roughly the same value.

If your stolen car is found and there's damage, comprehensive can help cover the cost of repairs, and you'll pay your deductible as you normally would.

Uninsured and at-fault drivers

When you add collision coverage to your policy, a collision deductible waiver allows you to skip the deductible when you're struck by an uninsured driver. If the deductible waiver's available, it's also required when you add the coverage to your policy.

Saving money without compromising coverage

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Insurance is largely a matter of risk. The more financial risk you assume through higher deductibles and lower coverage limits, the lower your monthly premium will be. But choosing low deductibles and high coverage limits offer maximum peace of mind in case you're involved in an accident.

For a personalized recommendation, visit our online Coverage Counselor® or give us a call anytime at 1-800-ESURANCE (1-800-378-7262).

Related link

The right amount of coverage
Find out how to manage your policy's coverage limits.

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