Deductible, explained
The amount you pay out of pocket before your car insurance kicks in to cover the rest of a claim.
What it means
A deductible is the portion of a repair or replacement bill you're responsible for when you file an insurance claim. If you have a $500 deductible and your car suffers $3,000 in hail damage, you pay the first $500 and your insurer pays the remaining $2,500. Deductibles apply per incident, and they're separate for collision and comprehensive coverage. You choose your deductible amount when you buy the policy. Common options are $250, $500, $1,000, or higher. Lower deductibles mean higher monthly premiums, and vice versa.
Why it matters
Your deductible directly affects both your premium and your out-of-pocket risk. A $1,000 deductible might cut your premium by $30 a month compared to a $250 deductible, saving you $360 a year. But if you file a claim, you're on the hook for four times as much up front. If you're financing or leasing, your lender may cap how high your deductible can go. And if you're underwater on your loan, a high deductible plus a totaled car can leave you owing thousands after insurance pays out.
What to do
If you're deciding whether to keep an older car or buy something newer, check our sell or keep tool. It factors in insurance costs and helps you see whether a high deductible on an aging car still makes financial sense.
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