What is a deductible in car insurance? Full guide 2024

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Sunny Yadav updated on 29 February 2024

Navigating the world of car insurance in Canada can feel like a maze, but understanding what a car insurance deductible is is a great place to start.

This guide will simplify everything you need to know about car insurance deductibles, from how it works, making it easier for you to make informed decisions. Get ready to demystify one of the key components of your car insurance policy, step by step.

Then use our free comparator to explore the best car insurance plans in Canada and get free personalized quotes so you can get a policy that suits all your needs with the best deductible option.

What does deductible mean in car insurance?

  1. It’s the amount you pay before your insurer covers the remaining costs.
  2. Your chosen deductible amount directly influences your monthly premiums.
  3. Deductibles apply to each claim filed.
  4. Different types of coverage may have varying deductible amounts.
  5. Opting for a higher deductible can lower your insurance premiums.

What is a deductible in car insurance in Canada?

In car insurance like CAA car insurance, for example, a deductible is essentially the amount of money you are responsible for paying out of pocket before your insurance company kicks in to cover the remaining cost of a covered claim. It's like a financial hurdle you have to cross before your insurance starts helping.

Car insurance deductible meaning — with example:

  1. Imagine you have a fender bender, and the repairs for your car cost $2,000.
  2. If your car insurance deductible is set at $500, that means you'll need to pay the first $500 of the repair costs yourself.
  3. Your insurance company will then cover the remaining balance of $1,500.

You typically choose your deductible amount when you purchase your car insurance policy. Higher deductibles generally lead to lower insurance premiums, as you're shouldering more of the financial risk.

Also, you'll pay your deductible each time you file a claim, not just once per year. Deductibles typically apply to specific coverages like collision and comprehensive, not liability coverage.

Compare different car insurance policies using our comparator to find the best option with the right deductible. Get personalized quotes based on your unique needs right here.

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How does car insurance deductible work?

Now you know what a car insurance deductible means. But how does deductible work for car insurance? Let's find out.

When you file a claim, you pay your deductible. You'll first be responsible for paying your chosen deductible amount directly to the repair shop or other service provider. Following this:

  1. Your insurer assesses the claim: Your insurance company will investigate the claim to determine if it's covered under your policy and for how much.
  2. Your insurer pays the remaining cost: Once the claim is approved, your insurance company will pay the repair cost minus your deductible, up to your policy limits. They may send a check directly to the service provider or reimburse you after you pay.

Here are some important things to remember:

  • Different types of coverage may have different deductibles: Collision and comprehensive coverage typically have deductibles, while liability coverage usually doesn't. You can choose different deductibles for each type of coverage.
  • You pay the deductible for each claim: It's not an annual fee. If you have multiple claims in a year, you'll pay the deductible for each one.
  • Not all damage requires paying the deductible: If the other driver is at fault and their insurance covers the damage, you generally won't pay your deductible. This is called filing a claim "through the other driver's insurance."
  • Deductible amount affects your premium: Choosing a higher deductible will usually lower your insurance premium, as you're taking on more financial responsibility. However, make sure you can afford the deductible if you need to file a claim.

Example of how does a car insurance deductible work

  1. You have a $1,000 deductible for collision coverage.
  2. A deer runs into your car, causing $5,000 in damage.
  3. You pay your $1,000 deductible to the repair shop.
  4. Your insurance company reimburses you for the remaining $4,000, up to your policy limit.

Good to know

Understanding how car insurance deductibles work can help you make informed decisions when choosing your policy and be prepared for the financial aspects of filing a claim. Exploring multiple options like Intact car insurance, RBC car insurance, and more will help you decide the best deductible option.

When do you pay the deductible for car insurance?

You pay your car insurance deductible when you file a claim that is approved and covered under your policy. Again, it's not an annual fee, but rather a per-claim cost you incur.

The timing of payment might vary depending on your insurance company and repair shop procedures. Some shops may require upfront payment of your deductible, while others might collect it later.

But the question stands — When do you pay the deductible for car insurance?

Here's a breakdown of the timing:

  1. After you file a claim: You initiate the claim process with your insurance company, providing details about the incident and damage.
  2. Claim gets approved: Once your insurance investigates and determines the claim is covered under your policy, they will notify you of the approval.
  3. Before repairs begin: You typically pay your deductible before repairs start or directly to the repair shop as instructed by your insurance company. This ensures you fulfill your financial responsibility before they cover the remaining cost.
  4. Repairs get completed: The repairs for your vehicle are finalized according to the approved estimate.
  5. Insurance handles remaining costs: Your insurance company then processes the claim and pays the repair shop or reimburses you for the repair cost minus your deductible, up to your policy limit.

You only pay a deductible if the final repair cost exceeds your deductible amount. If the damage is less than your deductible, you'll be responsible for the full cost yourself.

Good to know

We recommend you explore our easy-to-understand guides on different car insurance providers like SGI car insurance or Allstate car insurance to understand how deductibles work with them and the various options they offer. You can also check them based on locations like Car insurance in Ottawa or Calgary car insurance.

How much is deductible for car insurance?

Determining how much is a deductible for car insurance can be challenging since its cost can vary widely depending on several factors, such as:

  • Your chosen deductible amount: This is the most significant factor. Deductibles typically range from $100 to $2,000, with $500 being the most common choice. Opting for a higher deductible generally leads to a lower premium, but remember you'll need to pay that amount out of pocket for each covered claim.
  • Your insurance company: Different companies may offer different deductible options and pricing structures. Compare quotes from multiple insurers to find the best combination of coverage and affordability.
  • Your age, driving history, and location: These factors significantly impact your overall insurance premium, so they indirectly affect the deductible cost. Younger drivers, those with accidents or tickets on their record, and residents in areas with higher accident rates tend to pay more for insurance, including deductibles.
  • Your car's value: Generally, the more expensive your car, the higher the potential repair costs and, consequently, the deductible amount. Some insurers might offer tiered deductible options based on vehicle value.
  • Type of coverage: While collision and comprehensive coverages typically have deductibles, liability coverage usually doesn't. You might even be able to choose separate deductibles for collision and comprehensive sections of your policy.

You must compare multiple providers to get car insurance with the best deductible option. You can do it right here using our free comparator tool below. Compare personalized quotes from the best car insurance plans in Canada and start saving now.

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How to avoid paying car insurance deductible?

While there are some strategies to minimize the chances of paying your car insurance deductible, it's important to understand that completely avoiding it often comes with risks or isn't always feasible.

Here are some methods to consider, each with its pros and cons:

Choose a higher deductible:

  • Pro: This is the most direct way to lower your premium, which means you pay less each month.
  • Con: If you need to file a claim, you'll have to pay a larger amount out of pocket upfront, which might strain your finances.

Avoid filing small claims:

  • Pro: If the repair cost is less than your deductible, paying yourself might be cheaper than filing a claim and raising your future premiums.
  • Con: This approach only works for minor damage. Neglecting major repairs could lead to further issues and safety concerns.

Negotiate with your mechanic:

  • Pro: In rare cases, your mechanic might agree to waive or reduce your deductible, especially if they offer direct billing to your insurance company.
  • Con: This relies heavily on building rapport and goodwill with the mechanic and their willingness to do so is uncertain.

Utilize diminishing deductible programs:

  • Pro: Some insurers offer plans where your deductible gradually decreases over time if you drive accident-free for several years.
  • Con: Not all companies offer this, and it requires a claim-free history, which might not be achievable for everyone.

Consider collision deductible waivers:

  • Pro: This add-on coverage waives your deductible if the other driver is at fault (restrictions apply).
  • Con: This comes with an additional cost on your premium and might not be available in all areas or situations.

Watch out!

Some methods advertised online to avoid deductibles might be fraudulent or violate your insurance contract, potentially leading to claim denials or legal trouble.

How to choose the right deductible?

Before we discuss how you can choose the right deductible, let’s take a look at some commonly asked questions related to car insurance deductible.

What is the average car insurance deductible?

The average car insurance deductible in Canada usually falls between $500 and $1,000. This range can vary depending on the policyholder's choice, the type of coverage (e.g., collision, comprehensive), and the insurance provider. It is therefore recommended to compare providers and weigh your options.

What is 1000 deductible car insurance?

1000 deductible car insurance refers to a policy where you are responsible for the first $1,000 of covered damage to your vehicle before your insurance company pays anything.

Here are its pros and cons:


  • Lower monthly premium: Compared to policies with lower deductibles, a $1,000 deductible typically brings significant savings on your monthly insurance cost.
  • Potentially discourages small claims: Knowing you need to pay $1,000 upfront might make you consider filing claims only for more significant repairs, potentially benefiting your future premium due to fewer claims filed.


  • Higher out-of-pocket cost when filing a claim: If your car needs repairs, you'll have to pay $1,000 yourself before your insurance kicks in. This can be a financial burden, especially for unexpected repairs.
  • May not be suitable for everyone: If you can't afford a $1,000 upfront payment, choosing this option might not be wise.

What does $0 deductible mean in car insurance?

This refers to a policy where your insurance company covers all covered repair costs from the beginning, meaning you pay no deductible.

Here are its pros and cons:


  • No out-of-pocket cost for covered repairs: You won't need to pay anything directly for covered repairs, providing financial peace of mind.


  • Highest monthly premium: This type of policy typically comes with the highest monthly cost compared to other deductible options.
  • Potential for more frequent claims: Knowing you don't pay anything upfront might lead to filing claims for even minor repairs, potentially impacting your future premium through increased claims history.

To be sure of the deductible and how it works based on your unique preferences, you must get quotes from providers. You can do it right here using our free tool below. Compare car insurance plans with the best deductible options.

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Choosing the right deductible

The ideal deductible choice depends on your circumstances:

  • Budget: Consider your ability to handle a $1,000 out-of-pocket expense if needed.
  • Risk tolerance: Are you comfortable taking on more financial risk in exchange for a lower premium?
  • Driving habits: If you're confident in your safe driving, a higher deductible might be suitable.


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Sunny Yadav Copywriter

Sunny has over six years of experience curating engaging content spanning across industries. Specifically in finance, his expertise is insurance reviews and lending and investment topics.