Car Insurance Deductibles

Car insurance deductibles are a part of your policy that outlines the amount you will personally pay before your provider covers the rest. Although it seems straightforward, choosing your deductible depends on the types of coverage you select and your individual needs.

The only time you will have to pay a deductible is when you file a car insurance claim. The amount will vary based on each individual policy. When searching for coverage, always factor in how much your deductibles will cost and what is included.

Under Direct Compensation-Property Damage (DCPD), if you are not at fault for an accident, your own insurer pays for your repairs, and you typically do not have to pay a deductible (unless you specifically chose a policy with a DCPD deductible to lower your premiums).

Examples of how a car insurance deductible works:

Let’s look at how this works in real life with two everyday examples in Mississauga. Imagine your Mississauga car insurance has a $500 deductible for both collision and comprehensive coverage.

Scenario 1: A fender-bender on Hurontario Street
You’re driving near Square One during rush hour and accidentally rear-end the car ahead of you. A local body shop estimates it will cost $3,500 to fix your smashed bumper.

• You pay your $500 deductible directly to the repair shop.
• Your insurer pays the remaining $3,000.

Scenario 2: Storm damage in Port Credit
Your car is parked in your driveway overnight when a severe storm hits. A heavy tree branch crashes onto your windshield, causing $1,800 in damage.

• You pay your $500 deductible to the glass specialist.
• Your insurer pays the remaining $1,300.

What if the damage is minor? If a runaway shopping cart at Heartland Town Centre leaves a scratch that costs $400 to fix, you won't file a claim. Because the repair is less than your $500 deductible, you simply pay the $400 out of pocket.

Most of the time, increasing your insurance deductible will save you money on your policy. This depends on your circumstances and specific policy details. Keep in mind that if you increase your deductible, you will be responsible for paying it if there is a claim.

You may spend more money when the claim rolls around. Having a higher deductible can also have a negative impact if you need to file a smaller claim – the deductible may be higher than the cost of the damage out of pocket.

When purchasing automobile coverage, you can choose the deductible amount. Choose a reasonable deductible based on the coverage and your financial situation. On average, it will cost between $500-$1,000.

Most drivers have a $500 deductible. Ontario's standard deductible offer is $500 for collision and $300 for comprehensive coverage. But this doesn’t mean it is right for you.

If you have a vehicle over ten years old, you may not want to carry a $1,000 deductible because the vehicle value is likely within a few thousand dollars.

Generally, the higher your deductible, the lower your yearly payment. Reviewing your policy or contacting your insurer can confirm the deductible you carry.

Often, the higher the amount you choose, the lower your rate will be. For example, choosing a $2,000 deductible will result in a lower premium than choosing the $500 option.

Why is this the case? Higher deductibles reduce the odds of your filing smaller claims. Let’s say that you have a $500 deductible. You get into an accident, file a claim, and find out there is $5,000 worth of damage.

You will pay $500 out of pocket in this scenario, and your insurer will pay the remaining $4,500 to cover the $5,000 of damage. You pay the deductible if you cause the accident. If you are not the cause of the accident or have accident forgiveness, your insurer may waive the fee.

A disappearing, or vanishing, deductible is an endorsement that can be added to your coverage to lower your costs. For each year you do not file, your payment will be reduced by 20%. Ideally, after five years of driving, there would be no fee to pay unless you make a claim.

Advantages:

• It is an extra way to save.
• You pay less money out of pocket if you file an at-fault accident.
• Once you sign up, your insurer will automatically lower your cost each year.

Disadvantages:

• You will have to pay an extra cost to add it to your plan.
• Not all drivers qualify.
• Not all insurers offer this incentive.
• It may or may not be worth it, depending on when/if you file.

Each insurer that offers this feature has a unique way to administer its program. Some will offer a fixed yearly discount, while others use a percentage.