What Is An Auto Insurance Deductible? Should You Raise It?

What Is An Auto Insurance Deductible? Should You Raise It?

Written by Matthew Taylor
Fact-checked by Caitlin Wood
Last Updated October 25, 2021

Auto insurance is mandatory in all Canadian provinces, although certain provinces may require more coverage. Having the appropriate insurance coverage will not only help protect the driver and passengers but will also help cover any costs in the event of an accident. Although your insurance will usually cover a large portion of the costs when you get into an accident, you might have to pay some money out of pocket before your insurance kicks in. This amount is known as a deductible. 

What Is An Auto Insurance Deductible? 

An auto insurance deductible is the amount listed in your insurance policy that you will have to pay out of pocket before your insurance provider will cover the remainder of any costs. You have to pay the deductible whenever you file an insurance claim for your vehicle. Different insurance plans and providers have different deductible amounts, meaning that you can shop around to find a deductible that works for you.

Types Of Car Insurance Deductibles

Deductibles come into play for both comprehensive and collision coverage, however, there are no deductibles for liability in car insurance. 

Comprehensive Car Insurance Deductibles

Comprehensive car insurance protects your car when it is parked, including against any damage like hail, lightning, or if something falls on it. So if your car is damaged due to this or vandalism and theft, you will have to pay a deductible whenever you make a claim under this kind of car insurance. The amount paid is dependent on the deductible you’ve chosen.

Collision Insurance Deductibles

Collision insurance offers protection whenever you get into a car accident. You will have to pay a deductible if you are at fault in the accident, but you usually won’t have to if you’re not at fault. When you’re not at fault, it is typically covered by the Direct compensation property damage, or DCPD, which is a mandatory coverage in ON, QC, NS, NB, NL and PE. However, if you’re partially at fault, you pay depending on how much at fault you are – for example, if you are found to be only 75% at fault, then you pay 75% of your deductible.

Find out if your car insurance covers your friend driving your car.

Do You Have To Pay A Deductible For No-Fault Insurance? 

Yes, you’ll have to pay a deductible if you have no-fault insurance if you’re either partially or fully at fault in an accident. If you are not at fault, you don’t have to pay a deductible since your insurance company will work with the insurance company of the at-fault driver for the insurance payout. 

Learn what is accident forgiveness insurance.

What Is A Disappearing Deductible?

A disappearing deductible is a deductible that you can add to your insurance to lower your costs. Each year that you do not file an insurance claim, your deductible payment will become smaller until you don’t have to pay a deductible when you file an insurance claim. For example, an insurer may offer a 20% deductible reduction each consecutive year you do not file a claim. This means that in 5 years, you won’t have to pay a deductible, however, you will be paying for the policy itself. 

However, such a deductible comes with its pros and cons. 

Pros

  • One of the biggest advantages of a disappearing deductible is that your payments get smaller each year. Your insurer automatically adjusts how much you will have to pay, so you don’t have to jump through any hoops to make a smaller payment. 
  • Your deductible will also be smaller since it gradually becomes smaller the longer you go without making a claim. If you make a claim in 3 years, that means your deductible will have been reduced by a certain degree, meaning you won’t have to pay the full deductible. 

Cons 

  • The biggest downside to a disappearing deductible is that it is an extra cost, so you will have to pay more to have it on your insurance plan.
  • Another downside to this offer is that not all insurers offer it. 
  • If you’re not a safe driver, this policy would be a waste of money. 

How Much Should Your Car Insurance Deductible Be?

Deductibles can vary significantly depending on your insurance provider. In Canada, they are commonly between $100 and $2,000. Since you can choose an insurance provider and policy (and, therefore, a deductible), you should pick a deductible that you can afford. Depending on your financial situation, a high deductible might make more sense than a low deductible, or vice versa.

High Deductible

A high deductible means that your monthly insurance rate will be lower. You might want to consider a high deductible if you have a high-end or brand-new vehicle. The reason being, the cost of these vehicles is high, so naturally, the monthly insurance payment tends to be quite expensive. Increasing your deductible can help lower your monthly car insurance premiums.

A high deductible might also be better if you have a good driving record or drive in low-risk situations, such as rarely driving in heavy traffic or on the highway. In any case, you must consider your income when you choose a deductible. You should compare the savings on your premium with the cost of a high deductible to make the right choice. 

Low Deductible

A low deductible, meanwhile, might be for you if you have a less expensive or an older vehicle. The monthly insurance payment will be lower, so there might not be a point in having a big deductible. It is also a good option if you know you won’t be able to afford to pay out a large lump sum for a deductible. A low deductible might also be desirable if you are more likely to be in an accident, such as if you spend a lot of time on the road or if you frequently drive at night. Just keep in mind, that a low deductible means that your monthly insurance rate will be higher.

Find out why insurance rates are lower for women

How To Choose Your Auto Insurance Deductible 

Choosing a deductible depends on your financial situation and the kind of coverage that you’re looking for. You will need to balance the savings that you get on your monthly insurance payments with the cost of a higher deductible. In some cases, it might make sense to go with a low deductible; in others, it might make sense to go with a higher deductible.

Moreover, when choosing your deductible amount, you’ll want to consider:

  • The value of your car – if you have an expensive car and don’t plan on using it much, it may be worth having a higher deductible so you can get a lower premium. 
  • Your driving record – if you have a poor driving record, it may be worth having a lower deductible as the higher premium cost may still be less than what you’d pay through your deductibles. 
  • Where you live – If you live in a high-crime neighbourhood, you may want a lower deductible as your likelihood of making a claim is higher. 
  • Your financial situation – If you get into an accident and have to pay a high deductible, can you comfortably afford it? 
  • Your risk tolerance – are you willing to risk paying more if you get into an accident or do you prefer a set amount you know you can afford?

Types of deductibles

  • Collision Deductible – You can get collision deductibles, where the amount you pay depends on if you’re at fault (and if so, how much) in an accident or not. If you’re not at fault, you usually won’t have to pay a deductible, but if you’re totally at fault, you’ll have to pay the full deductible.
  • Comprehensive Deductible You can also get a comprehensive deductible, which protects your car when it’s parked. You will always pay the full deductible in this case.
  • Disappearing Deductible You can add a disappearing deductible to your insurance, which gets smaller each year that you don’t file a claim on your insurance.

There are a few questions you should ask yourself when choosing a car insurance deductible. You should think about how tolerant of risk you are. If you are willing to accept risk, you might consider a high deductible to save on your monthly premiums. You should think about how much money you would save by increasing your deductible, and you think about how much you can actually afford.

Car Insurance FAQs

What are zero-deductible policies?

Zero-deductible policies have no deductible for you to pay. In other words, if you had a covered claim under a zero-deductible policy, your insurance provider would cover the entire cost.

Should I file a claim or pay the damages myself?

It really depends on how much you’ll have to pay. For example, if your insurance provider would have to pay thousands of dollars, it might be worth it to file a claim. But if they would only have to pay a few hundred dollars, it might be worth it to pay everything yourself since filing a claim usually means that you will have to make higher insurance payments.

How does accident forgiveness affect my deductible?

It doesn’t. You will still have to pay your deductible. You will likely just end up paying a lower deductible since accident forgiveness is usually only available for people who haven’t submitted a claim for six years.

Do I pay my deductible if my car is stolen?

If your car is stolen, your comprehensive coverage should cover the cost of the incident. However, you will have to pay the deductible. Your insurer will basically pay you the estimated value of your car minus the deductible. 

Are there any deductibles for third-party liability?

Yes, you have to pay a deductible if you have third-party liability if you are at fault in an accident.

Bottom Line

Your auto insurance deductible is the amount that you will have to pay out of pocket before your insurance provider covers the rest. Depending on the kind of insurance coverage and whether or not you are at fault, you may have to pay the deductible. You can also shop around for policies with different deductible amounts. A high deductible means that you save money on your monthly insurance payments, but you will have to pay a lot more if you get into an accident. A low deductible means that your monthly insurance payments are higher, but you will have to pay less if you get into an accident. 

There are some good reasons for going with either a high or low deductible, but what’s most important when considering how much your deductible should be is your financial situation. You don’t want to be stuck with a monthly insurance payment or a deductible that you can’t afford, and you don’t want to be paying more than you have to. Be sure to do your research so you find a deductible that works for you.


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Matthew joined the Loans Canada writing team in 2021 while was finishing up a Bachelor's degree at the University of Saskatchewan. It was there that he discovered his love of writing. His work has appeared in several publications, including the Canadian Student Review and NewEngineer.com. In his spare time, Matthew enjoys reading, geocaching, and spending time with his family and pets.

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