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UPDATED: Mar 13, 2020
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People who have never filed a car insurance claim may not understand exactly how the deductible will apply to the loss. If you don’t know how your insurance works, you will not be able to make the best decision about your policy. For example, you may choose a deductible that is higher than you can comfortably pay. By knowing in advance how your deductible applies to your loss, you can determine how much deductible you can afford to pay.
The Role of Deductibles in Auto Insurance
The deductible is the portion of the repairs that you agree to pay in the event of an auto accident. Unlike a medical insurance deductible, which applies yearly, auto insurance deductibles apply to each incident on your policy. This means that every time your vehicle is involved in an accident, you pay the same deductible for damage.
If your vehicle is involved in multiple accidents and you choose to have all of the damage repaired at once, you still must pay a separate deductible for each accident. Similarly, if you take your vehicle in for repairs and the adjuster finds preexisting damage on your vehicle, you will need to pay a separate deductible to repair that damage.
Your deductible will be subtracted from the settlement amount that your insurance company offers you for the repair of your vehicle. You then owe the deductible to your body shop at the time repairs are completed. Usually, claims checks will be issued two-party to you and the body shop you choose to do the work. At the time repairs are completed, you will sign over the claims check and pay the difference.
Deductible Reimbursement and Subrogation
If you are not at fault for an accident, your insurance company may be able to reimburse your deductible by filing a subrogation request against the at-fault party’s insurance. Once the responsible party’s insurance pays the damage, your deductible will be returned to you. This process can take several weeks or even months depending on the complexity of the accident and the size of the insurance company involved; you should not assume that you will receive your deductible back in time to pay for the damage.
Some car insurance companies are able to waive your deductible if they know the other insurance company has accepted liability. If you know that a claim has been filed with the other insurance company, you can ask your claims representative if this is a possibility in your case.
In some situations, your deductible may be waived. Some states allow for a waiver of deductible if you are involved in an accident with another person who carries the same insurance as you do. You may also have a wavier of deductible applied to your claim if you are hit by someone who is uninsured, depending on the laws in your state. If you do qualify for a deductible waiver, your claims representative will inform you at the time your claim is filed.
How much should my deductible be?
The higher your deductible, the less expensive your insurance premiums will be. You should choose the highest deductible you will be comfortable paying in the event of an accident. Most policies have a default collision deductible of $500, but you can choose for $250 or $1,000; you may be able to select other figures as well, depending on what is available with your company.
How can I avoid paying a deductible?
If you file an insurance claim with the other person’s company, you will not need to pay your deductible. If the other driver is at fault for an accident, their insurance will pay for your damage and provide you with a rental car while your vehicle is in the shop.
This process can take longer than filing with your own insurance, and the payment may not be guaranteed. In simple liability cases, such as rear-end collisions, the other insurance company should be able to pay for your damage as soon as the claims adjuster speaks to the responsible party. If the accident is not a simple loss, the liability determination may take a long time, and your claim may be denied if you are found to be at fault for the accident.
Also bear in mind that you are responsible for reporting your accident your insurance regardless of who is at fault for the accident. Your claims representative should be able to advise you as to liability and whether you may be able to file directly with the other insurance to avoid paying a deductible.