What Is a Car Insurance Deductible? Everything You Need to Know

Most people have been paying car insurance for years and are still fuzzy on exactly how a deductible works. Not in a vague “I pay something when I have a claim” way — but in the real, practical way that matters when you’re standing next to a damaged car trying to figure out what happens next.

This post answers the questions people actually have. What a deductible is, when you pay it, when you don’t, what happens when the other driver is at fault, what glass coverage really covers, and a few things about towing and rental car coverage that most people don’t find out until they need them.

The Most Important Thing to Understand First

Your monthly car insurance payment covers damage you cause to other people — their car, their property, their medical bills. This is called liability coverage, and it has no deductible. Ever.

There is no cost to you when you file a liability claim. No barrier. No out-of-pocket amount. That is exactly what your monthly premium pays for — the ability to cause an accident and not personally owe every dollar on the other end of it. When you rear-end someone, your liability coverage takes care of their repairs. The other driver owes nothing because of your insurance. You owe nothing extra because of your insurance. The carrier handles it.

Deductibles only come into the picture when your own vehicle is damaged and you want your insurance to pay to fix it. That is a completely different set of coverages — and they are optional.

The Two Coverages That Have Deductibles

If you want your insurance to pay for damage to your own car, you need comprehensive coverage, collision coverage, or both. These are optional add-ons — and they are the only coverages that have a deductible attached.

Collision Coverage

Pays to fix your car when it hits something — another vehicle, a pole, a guardrail, a tree. If you’re at fault in an accident, this is what repairs your car. Your deductible applies.

Comprehensive Coverage

Pays for damage from almost everything that isn’t a collision — theft, fire, flooding, hail, a deer strike, a falling tree, vandalism, broken glass. In Minnesota and North Dakota where hail is a seasonal event and deer are everywhere, comprehensive is not optional for most people. Your deductible applies here too.

You can have different deductible amounts for comprehensive and collision. Many people carry a lower comprehensive deductible and a higher collision deductible — comp claims tend to be smaller and more frequent, while collision repairs tend to be larger.

What a Deductible Actually Is

A deductible is the amount you pay before your insurance pays the rest on a claim for your own vehicle.

If your deductible is $500 and your repair is $2,800 — you pay $500, your carrier pays $2,300.

If your repair is $400 and your deductible is $500 — your insurance pays nothing. You’re under your deductible, so you cover the whole thing yourself.

That’s it. That’s the whole concept.

How It Works at the Repair Shop

You don’t write a check to your insurance company. Here’s what actually happens:

Your car goes to the shop. The carrier approves the repair. The shop fixes it. When you pick up your car, you pay your deductible directly to the shop. Your insurance company pays the rest directly to the shop. You drive away. Nobody bills you separately afterward.

How It Works If Your Car Is Totaled

If the cost to repair your car is more than what the car is worth, the carrier declares it a total loss instead of fixing it.

Your insurance company determines your car’s actual cash value — what it was worth on the open market the day before the accident. Not what you paid for it. Not what you owe on it. What it was worth. They subtract your deductible from that number and pay you the difference.

Example: Your car’s actual cash value is $9,000. You have a $1,000 collision deductible. Your carrier pays you $8,000. If you owe $11,000 on your loan, you’re $3,000 short — which is why gap coverage exists, but that’s a separate conversation.

You are supposed to File a Claim even though something small Happened

This surprises a lot of people. You always have to file a claim. It’s in your contract. Even if the damage to your car is close to or under your deductible, you are still supposed to file. Why? Sometimes a claim comes back to haunt you, that person who wasn’t even in the car you hit comes back with a lawsuit years later. They file for permanent injury right before the statute of limitations runs out. You don’t have any proof because it’s been years.

There are lawyers who live for these claims and how do you prove you didn’t do something years later?  Or remember that telephone poll or street sign you hit? The DOT could come back with a bill  a year later. If police or fire responded they will take down your information and the DOT could file directly with your insurance company on your behalf.

Your Deductible Resets With Every Single Claim

Car insurance deductibles don’t work like health insurance. With health insurance, once you hit your annual deductible you’re done for the year. With car insurance, every claim has its own deductible — no matter how many you file or how close together they happen.

Two claims in one month? You pay your deductible twice. Three vehicles hit in the same hailstorm? Three deductibles. There’s no annual cap, no credit for prior claims, no rollover. Some companies do offer one claim, one incident coverage. That could be important if you have 5 vehicles that could be at risk.

This is one of the most important things to think about when choosing your deductible amount — not just “can I afford this once” but “can I afford this if two or three vehicles in my household are hit in the same weather event?” Hail doesn’t pick one car. If you have three vehicles with $1,000 deductibles and a hailstorm rolls through, you could be looking at $3,000 out of pocket before your carrier pays a dime on any of them.

How to Choose the Right Deductible

Choose the highest amount you could comfortably pay out of pocket in a bad month — without it wrecking your finances. Higher deductible means lower monthly premium but more out of pocket when something happens.

Ask yourself:

• If I had a claim tomorrow, could I pay this deductible without going into debt?
• If two or three of our vehicles were damaged in the same storm, could we cover all the deductibles at once?
• How much am I actually saving in premium — and how long would it take to break even if nothing happens?

The math sometimes surprises people. Going from a $500 to a $1,000 deductible might save $80 a year in premium. You’d need six claim-free years to break even on that bet. Whether that’s a good bet depends on your driving history, your area, and where your vehicles are parked.

There’s no universal right answer. But there’s a right answer for your household — and it’s worth revisiting as your vehicles age and your financial situation changes.

When the Other Driver Is at Fault — This Changes Everything

Everything above applies when you’re filing a claim through your own insurance. When the other driver caused the accident, the rules are completely different — and almost always better for you.

Start With Their Insurance, Not Yours

When another driver is at fault, their liability insurance is responsible for your damages. That means you should almost always start by filing a claim directly with their carrier — not your own. Here’s why it matters:

• No deductible. Their liability pays for your repairs. You owe nothing out of pocket.
• Comparable rental vehicle. More on this below — it’s significantly better than your own rental coverage.
• No claim on your own record. Going through their carrier doesn’t affect your policy.
• Market value for your car regardless of your coverage. More on this too.

You Still Get Market Value Even If You Have Liability Only

This is one that carriers on the other side sometimes try to use against you — and it’s worth knowing clearly.

Even if you only carry liability on your vehicle and have no comprehensive or collision coverage, the at-fault driver’s insurance still owes you the actual cash value of your car. What coverage you chose to carry has nothing to do with what they owe you. Their liability is based on what they took from you — a car that was worth a certain amount on the market that day. Period.

Some carriers on the other side may imply that because you had no physical damage coverage, you placed no value on your vehicle. That is not accurate. Don’t accept a lowball settlement based on that reasoning. If you’re not sure whether an offer is fair, you can push back, get an independent appraisal, or consult with an attorney.

Rental Car When the Other Driver Is at Fault

This is one of the biggest differences people don’t know about.

When you file through your own rental reimbursement coverage, you get a set daily limit — often $40 or $50 per day — and you pay the difference if the actual rental costs more.

When the other driver is at fault and their liability is paying for your repairs, the rental situation is different. They owe you a comparable vehicle — something reasonably similar to what you’re driving — not whatever fits in a low daily dollar cap. If you drive a full-size truck and their liability is covering your claim, a compact car at $30/day doesn’t make you whole.

This is one of the clearest financial reasons to go through the at-fault driver’s insurance first when you have the option.

The Delay Problem — and When to Use Your Own Coverage Instead

Here’s the tradeoff nobody mentions: going through the other driver’s insurance can take longer. The other carrier has to investigate, confirm liability, and make a determination before they start paying for anything — including your rental. That process can take days or weeks. Meanwhile, you’re carless.

If you have collision coverage on your own policy and you need your car fixed fast, you have the option of going through your own carrier first. Your carrier handles the repair quickly and your rental starts right away. Then your insurance company goes after the other carrier to recover the money — a process called subrogation. If they’re successful, you may get your deductible refunded.

The tradeoff: you pay your deductible upfront and get a rental at your daily limit instead of a comparable vehicle. The benefit: your car gets fixed now, not after a liability investigation.

Which path makes more sense depends on the circumstances of the specific accident. Your agent can help you think through it — but you need to have collision coverage for this option to exist.

If You Have Liability Only and the Other Driver Is at Fault — Your Agent Has Limited Ability to Help

This is something people don’t find out until they’re in the middle of a frustrating situation, so it’s worth saying clearly.

If you carry only liability on your vehicle and you’re hit by an at-fault driver, your agent cannot file or manage the property damage claim on your behalf. The claim goes through the other driver’s carrier — not yours. Your agent has no authority to work a claim that doesn’t run through your own policy.

What that means practically: you are the one calling the other carrier. You are the one following up, pushing back on their assessment, negotiating the value of your car, arranging the rental, and tracking the whole process. It is doable — people navigate it successfully every day — but it is entirely on you.

The only things your agent can assist with in this situation are the coverages you actually elected on your own policy — typically medical payments coverage if you have it, and towing reimbursement if you elected it.

This is not a criticism of agents. It’s simply how the system works. Your agent can only work claims through your own policy. If the property damage goes through someone else’s liability, it’s outside their lane.

Knowing this ahead of time is genuinely useful — because it’s one of the real-world reasons that having your own comprehensive and collision coverage matters, even on an older vehicle. Not just for protection on your car, but for having someone in your corner when something goes wrong.

Liability-Only Cars: The Coverage Strategy Worth Knowing

If you have an older vehicle and you’ve dropped comprehensive and collision because the car isn’t worth paying for full coverage, you may still be able to add certain optional coverages — but it depends on your carrier.

Some carriers allow glass coverage, towing, and rental reimbursement on a liability-only vehicle. Others require comprehensive and collision before they’ll add any of those.

When a carrier requires physical damage coverage to unlock glass, towing, or rental — here’s the strategy: add comprehensive and collision at the highest deductible available, often $2,500. At that deductible, your premium barely moves because the carrier knows you’re unlikely to file on a minor loss on an older car. But now you qualify to add glass, towing, and rental — the three coverages that actually get used regularly on an older vehicle.

Some carriers will allow towing as a standalone on a liability-only car even when they won’t allow glass or rental. So your options may be partial depending on who you’re insured with. Ask your agent what’s available on each vehicle specifically.

Towing Coverage — and Why AAA Should Be Standard

Towing coverage on your auto policy reimburses a set dollar amount per tow — often $50 to $100 depending on your carrier. That sounds reasonable until you need a recovery from a ditch on a rural highway in January, or a winch-out from a snowbank, or a flatbed for a vehicle that can’t roll. Those situations can run $300 to $600 or more.

AAA membership covers towing up to a set mileage with no per-use cost. For anyone with older vehicles, anyone driving rural roads regularly, or anyone in Minnesota or North Dakota where winter road conditions are a real factor — AAA is a layer of protection your policy’s towing benefit doesn’t replicate.

Think of your policy’s towing coverage as a supplement on top of AAA — not a replacement for it.

Glass Coverage — More Than Just Your Windshield

Glass coverage is part of comprehensive — and it covers more than most people realize:

• Windshield — the obvious one
• Rear window — covered, and people are often surprised by this
• All side windows — covered
• Sunroof or moonroof glass — covered by most carriers; a few have exceptions, so ask

Your comprehensive deductible applies to glass claims unless you have a zero-deductible glass endorsement — which many carriers in Minnesota and North Dakota offer. With zero-deductible glass, a cracked windshield or broken side window costs you nothing. Without it, you’re paying your full comprehensive deductible on a glass claim, which often makes more sense to pay out of pocket and skip the claim entirely.

Ask your agent: do I have zero-deductible glass? If not, ask what it costs to add it. For most people it’s a few dollars a month and completely worth it.

Rental Car Coverage — The Daily Limit Gap

Rental reimbursement coverage pays for a rental while your vehicle is being repaired after a covered claim on your own policy. A few things to understand:

It only applies to covered claims. You can’t use it anytime you want a rental. It kicks in when you have a claim in progress and your car is in the shop.

There’s a daily limit — and you pay the gap. If your coverage is $40/day and the rental runs $55/day, you owe $15/day. Over 10 days in the shop, that’s $150 you didn’t plan for. Make sure your daily limit is realistic for what you’d actually need to rent — especially if you drive a truck or SUV.

It doesn’t last forever. Once your vehicle is declared a total loss, rental coverage typically continues for a limited number of days while you shop for a replacement — then it stops, whether or not you’ve found a new vehicle.

And remember: when the other driver is at fault and their liability is paying, the rental is based on a comparable vehicle — not your daily cap. That is a meaningfully better situation than running your own rental reimbursement coverage.

Loss of Use — One Quick Note

Loss of use occasionally comes up in insurance conversations and is sometimes confused with rental reimbursement. It’s compensation for the loss of use of your vehicle during a covered claim — not necessarily tied to whether you actually rent something. It’s uncommon in standard personal auto policies. If you see it mentioned on your policy and aren’t sure what it means, ask your agent.

The Bottom Line

Auto insurance is not complicated once you understand the basic framework: your monthly premium covers other people, deductibles only apply to your own vehicle coverage, and the rules change significantly based on who was at fault.

The most expensive mistakes happen when people don’t know these distinctions until they’re in the middle of a claim, trying to figure it out under stress. Now you know.

If you have questions about your current coverage, your deductibles, or what you actually have on each vehicle — that’s exactly the kind of conversation an independent agent is for.

Questions about your auto coverage? Reach out to Mitchell Insurance Agency for a free, no-pressure policy review.

Mitchell Insurance Agency LLC is a licensed independent insurance agency serving Minnesota, North Dakota, South Dakota, Iowa, Wisconsin, and Pennsylvania. Coverage details, carrier rules, deductible options, and program availability vary by carrier and state. Information in this post is for general educational purposes. Always review your specific policy and speak with your licensed agent about your individual situation. Note: liability claim handling processes and subrogation outcomes vary by carrier and circumstance.