Publish Date: September 2015
If you’re buying car insurance, the idea of a zero-deductible policy may hold appeal. After all, you wouldn't have to pay out of pocket after an accident, right?
Actually, the answer is a bit more complex than that. Whether you pay a deductible depends on several factors, including the types of coverage you select for your policy and state laws.
For starters, you’ll likely have to pay more for a zero-deductible policy up front, according to the Insurance Information Institute (III). That’s because deductibles are designed as a way for you to share the risk of an accident with an insurer, the III says, and buying a no-deductible policy puts the risk solely on the insurance company. A higher premium for a zero-deductible (or low-deductible) policy is the insurance company’s way of accepting that higher risk.
Another thing to know is that a deductible usually applies to each specific coverage on your policy. Typically, you’re able to set the deductible for your collision coverage and for your comprehensive coverage, and zero-deductible coverage may be an option.
When it comes to liability coverage, most insurance companies don’t require a deductible at all, regardless of your coverage selections, says the III.
On the other hand, you may find that, in some states, a zero-deductible option is not allowed for certain coverages — such as personal injury protection or uninsured motorist property damage coverage. Insurance is a regulated industry, so state law may actually require a deductible on certain coverages.
Bottom line: You may be able to choose some zero-deductible coverages, automatically have no deductible for other coverages, or be legally required to pay a deductible on other coverages. Talk with your agent — he or she can help you make the choices that fit your needs and budget.