No-Deductible Car Insurance: Is It Right for You? (2024)

When you purchase an auto insurance policy, you can choose your level of coverage and your deductible. The deductible is the amount of money you pay out of pocket in the event of a car accident, vehicle theft, or other claim.

If you choose a smaller deductible, you’ll pay less out of pocket after an accident, but your premium will cost more. If you choose a higher deductible, you’ll be responsible for more costs after an accident, but you’ll usually pay a lower premium.

Some companies also offer a no-deductible car insurance option. This means the insurance company covers the cost incurred from all damages in an accident. Here’s what you should know about no-deductible car insurance, and why it's important to compare car insurance rates with multiple deductible options. 

How auto insurance deductibles work

Suppose a rock cracks your windshield, and the replacement cost is $600. If you have a $250 deductible, you only pay that amount to the repair shop. Your insurance covers the remaining $350.

If you’re familiar with health insurance deductibles, auto insurance deductibles are a similar concept, with one significant difference: Health insurance deductibles reset annually, and usually have an annual out-of-pocket maximum amount. Once you meet that deductible, you don’t have to pay the deductible again until the following year.

But car insurance deductibles reset for each claim. If you have a claim for a broken windshield in January and a parking-lot fender bender in May, you’ll pay your deductible twice — once for each claim.

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How no-deductible car insurance works

When you opt for no-deductible car insurance, your insurance company pays the full cost of the covered damages. For example, if you need to replace your windshield because of rock damage and you have no-deductible coverage, the insurance company would cover the entire cost of replacing the windshield.

When you purchase a zero-deductible car insurance policy, you’re telling the insurance company to accept all financial risk in the event of a loss. Deductibles act as a way to share risk with the insurance company, and if you opt for a zero-deductible policy, you can expect to pay a higher premium to offset the increased risk for the insurer.^[1]

When you have to pay your deductible

You pay your deductible when you file a claim, and you have a set deductible for the damages included in the claim. For example, if you back your car into a light post and have a $1,500 deductible, you’d be responsible for paying up to $1,500 of the total repair costs. Once you file a claim with your insurance company, it’ll provide a list of approved repair shops. Once the repair shop offers you a quote, you’re responsible for your deductible, and the insurance company covers any remaining balance.

Deductibles apply to every claim. Your deductible isn’t limited to the annual deductible amount but per incident.

How to decide if the damage is worth filing a claim

Having a deductible allows you to decide if filing a claim is worth the effort or if it’s less expensive to pay for the repairs yourself. For example, if your claim is simple — like replacing a windshield — it might be easier and cheaper to pay for it yourself rather than filing a claim with the insurance company because filing a claim could increase your premiums going forward.

How to choose your deductible amount

Insurance companies offer different types of coverage and deductibles. Choosing the cost of your deductible depends on your needs and the company you choose to work with. Deductibles are split into two categories: high and low. 

A high deductible means you’re responsible for paying more of the repair costs up front, but your premium is usually lower because you’re taking on more financial responsibility. If you opt for a low deductible, you’ll pay more for your premium, but you’ll pay less for repairs following an incident.

Choosing your deductible is one of the most significant factors determining your premium cost. While it’s tempting to instantly choose a low- or no-deductible option to save money if you’re in an accident, there are some things you should consider. Here are a few questions to ask yourself and your insurance agent to choose the right deductible:

• What is your risk of an accident or incident? Do you drive a lot or regularly commute in bad weather or heavy traffic?

• Can you afford to pay out of pocket if you’re in an accident?

• How much are you willing to spend out of pocket?

• Could you realistically save up an emergency fund before an incident?

• What’s the value of your vehicle?

• What’s the difference in premium between your deductible options?

• If you have a loan on your vehicle, does your lender require a specific deductible?

• Do you need a deductible for medical coverage in an auto accident?

Some states have a required minimum deductible for certain types of claims. Common restrictions on no-deductible coverage include personal injury protection and uninsured motorist property damage coverage.

No-deductible insurance pros and cons

If you’re trying to decide whether purchasing no-deductible insurance is the right fit for you, it can be helpful to consider the pros and cons of this type of coverage.

Who should consider no-deductible car insurance?

No-deductible car insurance could be a good idea for you if you fall into any of these groups:

• Drivers with room in their budget: If you have wiggle room and can afford the higher premiums, a zero-deductible policy could help you avoid unexpected large expenses following an accident.

• Drivers with an expensive vehicle: Some vehicles are more expensive to repair or replace than others. If the cost to repair the vehicle is prohibitive, a no-deductible policy can provide some breathing room in the event of an accident.

• Drivers who have a higher risk of an accident: Since you have to pay a deductible every time you file a claim, it may be more affordable to invest in a no-deductible policy if you’re at a higher risk for accidents or incidents.

How to lower car insurance costs

The type of deductible you choose isn’t the only way for you to save money on your insurance costs. Here are a few other tips to lower your insurance premiums:

• Practice good driving habits. Insurance companies base their premiums on risk. Your driving history provides them with valuable information to assess your potential risk. Violations and previous accidents can result in higher premiums.

• Bundle home and auto coverage. Many insurance companies offer discounts for policyholders that combine multiple policies, like auto and home. Even if you don’t own a home, you can use this to bundle renters and auto coverage or your auto and specialty vehicle policies.

• Take advantage of safe driving programs. Many insurance companies offer discounts for utilizing safe driving habits. You may need to install a monitor in your car so the company can track your speed, stopping, and turning habits.^[3]

• Compare rates from multiple companies. When purchasing auto insurance, the simplest way to get the best price is to look at your options. Compare rates from at least three different insurers to get the best price for the coverage package.

Alternatives to no-deductible car insurance

Not everyone can afford the high cost of a no-deductible policy. Luckily, you have alternatives to consider when shopping for auto insurance coverage.

High-deductible policies

Consider a high-deductible policy if you’re comfortable taking on more risk but don’t want to pay the steep price of no-deductible coverage. If you do pursue this route, make sure you can afford to pay this higher deductible if you ever need to file a claim.

Low-deductible insurance

A low-deductible car insurance policy may be better if you don’t have enough immediate cash to pay a higher deductible. It’s also a good option if you have a higher chance of getting in an accident or filing a claim.

Vanishing deductibles

Some insurance companies offer vanishing deductibles. This “deductible reduction” is available to safe drivers who don’t have a history of filing claims. With a vanishing deductible, the insurer rewards you for maintaining a good driving record and not filing claims by reducing your deductible by $50, $100, or more per year.

For example, suppose you have a $500 deductible. If you drive safely for three years but then have an accident, your insurer might only require you to pay $200 instead of the total deductible amount of $500. This is because your vanishing deductible reduced your rates by $100 for each year of safe driving.

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