What Do Insurance Deductibles Mean?

Insurance deductibles are an important part of any auto insurance policy. But what do insurance deductibles mean for you after an accident?

Understanding the answer to this question can be the difference between paying a large amount out of pocket and avoiding those expenses altogether. This article will discuss insurance deductibles, why they exist, and how they might affect your overall costs after an accident.


A deductible is an amount you pay out of pocket before your insurance company will cover any additional costs. Deductibles exist to help insurance companies manage costs and spread out their risk. In turn, this helps keep premium costs low for policyholders.

When it comes to auto insurance, deductibles are typically set for specific coverages. This means you could have a $500 deductible for collision coverage and a $1,000 deductible for comprehensive coverage. Your plan pays for costs above the deductible up to a certain limit.


Damages covered by auto insurance typically include health care expenses, vehicle repairs, and other related costs up to your policy limits. But to access the coverage, you will first be required to pay your deductible.

Let’s say you have a $500 deductible and get into an accident that costs $2,000 to repair. In this situation, you are responsible for the first $500 (your deductible). The insurance company will pay for the remaining $1,500 of the repair costs.


Generally, when you purchase auto insurance, you choose your deductible amount. The typical auto insurance deductible ranges from $100-$1,000. If you choose a lower deductible, you will have a higher premium. This is because you’re transferring the risk to the insurance company.

On the other hand, if you choose a higher deductible, your premium will be lower. This is because a higher deductible shifts the risk to you, making it less expensive for the insurance company. However, if something happens and you need to file a claim, you’ll have to pay a larger amount out of pocket before your insurance company will cover the remaining expenses.