Your deductible is the amount you pay first; the insurer pays the rest. If your car sustains $4,000 damage and you have a $1,000 deductible, the insurer pays $3,000. Higher deductibles mean lower premiums but more out of pocket when you claim. Typical US deductibles run $250–$2,000; $500 and $1,000 are the most common choices. Liability cover has no deductible — it only applies to your own vehicle (collision and comprehensive).
Deductible impact on payout
| Repair cost | $250 deductible | $500 deductible | $1,000 deductible | $2,000 deductible |
|---|---|---|---|---|
| $800 | $550 payout | $300 payout | $0 (no claim worth filing) | $0 |
| $2,500 | $2,250 | $2,000 | $1,500 | $500 |
| $5,000 | $4,750 | $4,500 | $4,000 | $3,000 |
| $12,000 (total loss, ACV) | $11,750 | $11,500 | $11,000 | $10,000 |
What a deductible actually is
A deductible (called an excess in the UK) is the portion of any claim you agree to pay yourself. It applies separately to collision coverage (accidents involving another vehicle or object) and comprehensive coverage (theft, weather, fire, vandalism). It does not apply to liability coverage — that protects third parties and has no deductible.
Deductibles reset per claim, not per year. If you make two claims in twelve months, you pay your deductible twice.
How the maths works
The formula is straightforward: Insurer pays = assessed damage (or ACV for total loss) − your deductible. If damage is less than or equal to your deductible, the insurer pays nothing — you absorb the full cost. This is why filing a claim for a $400 dent when your deductible is $500 makes no sense financially.
Higher deductible vs lower premium: the trade-off
Choosing a higher deductible reduces your premium because you are taking on more risk yourself. The savings are real but vary by insurer and state. As a rough guide:
- Moving from a $250 deductible to a $500 deductible typically saves 10–15% on the collision portion of your premium.
- Moving from $500 to $1,000 typically saves a further 10–20%.
- Moving from $1,000 to $2,000 saves less in percentage terms — the premium discount flattens out at high deductibles.
Divide the annual premium saving by the extra deductible amount. If you save $200/year by raising your deductible from $500 to $1,000 (an extra $500 exposure), you break even in 2.5 years without a claim. If you go 5 years without a collision claim — a reasonable average — you come out $750 ahead.
When a low deductible makes sense
- You drive in a high-risk area with frequent minor accidents or vandalism
- You have limited savings and cannot absorb a large out-of-pocket cost
- You drive an older vehicle in dense traffic where small scrapes are common
- You lease or finance a vehicle — some lenders require a maximum deductible (often $500–$1,000)
When a high deductible makes sense
- You have an emergency fund that can comfortably cover the deductible without stress
- You have a clean driving record and low accident risk
- Your vehicle is older and lower in value — if ACV approaches your deductible, even comprehensive claims become worthless to file
- You plan to drop collision entirely once the vehicle depreciates sufficiently
Deductibles on a total loss
If your car is totalled, the insurer pays ACV minus your deductible. ACV is the market value of your vehicle immediately before the accident — not what you paid or what you owe on finance. If you owe more on your loan than the ACV, gap insurance covers the shortfall. Without it, you may owe money to the lender even after the insurer pays out.
UK excess: voluntary and compulsory
UK policies often have two components: a compulsory excess set by the insurer (often £100–£250) and a voluntary excess you add on top to reduce premiums. The total excess (both combined) is what you pay on any claim. Adding a £500 voluntary excess to a £150 compulsory excess means you pay the first £650 of every claim.
Frequently asked questions
Does my deductible apply to every type of claim?
Can I change my deductible mid-policy?
What happens if damage is less than my deductible?
Does a deductible apply to glass or windscreen claims?
What is gap insurance and when do I need it?
Sources & further reading
Figures, prices and policy details were current at the last-updated date above. Automotive pricing, incentives and regulations change frequently — verify time-sensitive details with the linked primary sources. Read our editorial policy and fact-checking standards.
