Yahoo Finance Can't afford a car insurance deductible? How to ensure a fender bender doesn’t sideline your finances indefinitely
Even a minor car accident can be traumatic for those involved. It can also prove costly.
While your auto insurance should cover damages to your vehicle, it typically comes with a deductible. But what happens if you can’t pay it?
The deductible is the amount you’ll need to pay out of pocket before your insurance kicks in. For example, if the repair bill is $5,000 and your auto insurance policy has a $1,000 deductible, then you’ll need to pay $1,000 and the insurance company will pay the remaining $4,000.
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While collision coverage will repair your vehicle for an insured loss up to its actual cash value (ACV), you might also have comprehensive insurance, which includes coverage for non-collision events, such as hail or tornado damage.
There are several types of optional coverages, so you may have more than one deductible (it’s worth chatting with your insurer if you’re unsure).
Usually, you pay the deductible directly to the auto repair shop. But you’ll have to pay it before you can pick up your vehicle — and it’s perfectly legal for the repair shop to keep your car until you do.
You might also be required to pay the deductible before the insurance company will pay its portion. So if you can’t pay, you can’t drive.
Vehicle insurance rates have surged
If you’re unable to pay your deductible, you’re probably not alone.
Thirty-seven percent of U.S. adults aren’t able to cover a $400 emergency expense with cash or its equivalent, according to the Federal Reserve — and the typical deductible is $500.
But many people are choosing a much higher deductible — such as $1,000 or $2,000 — to reduce their monthly insurance premium. In part, that’s because auto insurance premiums have skyrocketed in recent years, and a higher deductible can make monthly insurance payments more affordable (so long as you don’t get in an accident).
Driven by surging repair prices and deteriorating driver habits, car insurance rates have risen 47.3% over the past five years (to May 2024), with a 20.3% increase over just the past year.
The average national rate for car insurance, as of May 2024, is $2,068.
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If you can’t pay, you have options
If you find yourself unable to pay your deductible, you have a few options.
It should go without saying that if you can get the repairs done for less than the deductible — and for an amount you can afford — you can pay out of pocket and avoid making an insurance claim.
If the damage is only cosmetic, such as a dent or scratch, you might choose to continue driving the vehicle as is, and either not bother getting it repaired or repair it when you can afford to. Of course, you may not always have a choice, as the car may not be operable or safe without repairs.
You may be able to work out a payment plan with the auto repair shop — some shops even advertise deductible financing.
You could also ask the shop if they’d be willing to waive the deductible. This is unlikely, but if you’re a regular or if they’re already making a lot from the repairs, it doesn’t hurt to ask. If you do work something out, make sure it’s above board: If the shop over-bills the insurance company, it could get you into legal trouble.
You could also try calling your insurer. You won’t be able to change your deductible after an accident ― you can only do this when you renew your policy — but you might be able to work out a payment plan or deferral.
Another option is to take out a personal loan from a bank or credit union. A personal loan can be used for any purpose, and it may or may not be secured against an asset such as your car.
However, the interest rate could be high if you have poor credit and you’ll need to pay it back within a specified period — plus, if it’s secured against your car and you can’t make your payments, you could end up losing your car.
Planning ahead can help
Your best bet is to avoid being in a situation where you can’t pay your deductible. If you don’t have enough savings to cover a large deductible (or more than one deductible), you may want to consider paying a higher monthly premium to keep it low.
It’s also important to have an emergency fund. This ideally should cover at least three to six months of your regular expenses, which would likely be enough to pay a deductible if needed.
By planning ahead — and exploring your options after an accident — you can make sure that a fender bender won’t sideline you indefinitely.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
