What Is No-Deductible Car Insurance?

What Is a Deductible in Car Insurance?

Before deciding whether a no-deductible insurance policy makes sense for you, it helps to understand how deductibles work.

The deductible is the amount you pay out of pocket before your insurance kicks in on a claim.

Example: Say you're in a fender bender and the repairs cost $3,000. If your deductible is $500, you'd pay $500 and your insurer would then pick up the remaining $2,500.

Your deductible also affects what you pay each month. A lower deductible means higher premiums, and vice versa. Raising your deductible amount is a straightforward way to lower your monthly premiums. But it's wise to lower your deductible if you won't be able to manage paying a higher one after an accident.

Generally, the best strategy is to balance an affordable monthly premium amount with what you'd owe after an accident.

Myth buster: Zero-deductible car insurance doesn't mean you'll never pay anything after a claim. It just means you won't pay a deductible for the specific coverage it's attached to. For example, you could have a $0 deductible on comprehensive but still owe $1,000 on a collision claim.

Here's a breakdown of what deductible costs can be for various coverages:

Learn more: What Is a Car Insurance Deductible?

How Does No-Deductible Car Insurance Work?

No-deductible car insurance eliminates the upfront deductible you might face after an accident. In other words, you don't have to pay a deductible ranging from $250 to $2,000 before your insurance coverage kicks in.

On the surface, it makes the cost of an accident lower because you don't have to come up with a deductible. But, of course, there's a catch: With no-deductible coverage, the entire cost of the policy is weighted in the premiums, which means the insurer carries all the risk associated with a potential future accident. For this reason, no-deductible policies tend to cost more than traditional car insurance.

According to the Insurance Information Institute (III), increasing your deductible from $200 to $500 can cut collision and comprehensive premiums by 15% to 30%. And if you raise it to $1,000, you could save 40% or more. Conversely, lowering your deductible, or in this case, eliminating it altogether, can significantly increase your monthly premiums.

Due to the heightened risk to the insurer, few companies are willing to offer this kind of policy. Those that do may require you to have a very good driving record that's free of accidents, and even excellent credit-based insurance scores.

While costs vary by insurer and policy type, here's what you might expect to pay for a typical policy versus a no-deductible one.

^*Insurance.com typical policy data based on a full-coverage, $100,000 per-person policy with $300,000 per incident coverage for bodily injury and $100,000 per incident for property damage.
^**Assumes a 50% monthly premium increase over a standard deductible policy with similar limits.

Pros and Cons of No-Deductible Insurance

A no-deductible policy can wipe out deductible costs after an accident, but higher premiums and limited availability are worth considering first.

How to Save on Car Insurance

There are several ways to lower your car insurance costs, including:

• Reduce your coverage. If you have an older vehicle, you could reduce your coverage by dropping collision or comprehensive coverage. Collision covers damage to your vehicle in an accident. Comprehensive covers damage to your car from non-accident events, such as theft or repairs after a tree falls on your vehicle. If your vehicle's value is below a certain threshold, it's possible that it may not be worth it to pay a monthly fee for these kinds of coverages anymore.
• Raise your deductible. You can also reduce your car insurance costs by raising your deductible. This way, you pay less for your monthly premiums but will pay more out of pocket if you get in an accident.
• Drive safely. Remember, insurance companies calculate their premiums based on their risk exposure. A clean driving record with no tickets or accidents shows insurers you're a low-risk driver. The opposite is also true: moving violations and previous records demonstrate higher risk and will likely drive up your premium rate.
• Compare your rates. Make sure you're not overpaying for the same coverage other providers offer at lower rates. The III recommends checking rates from at least three providers to get the best combination of coverage and rate.
• Explore available discounts. Many car insurance companies offer a variety of insurance discounts for bundling policies, maintaining a clean driving record or taking a driver safety course.

Learn more: How to Get Car Insurance

Frequently Asked Questions

Choose the Right Coverage for Your Budget

No-deductible car insurance gets rid of your out-of-pocket costs when you file a claim. This can be a huge financial relief if you don't have emergency savings set aside. But zero-deductible policies come with significantly higher monthly premiums. If you're a safe driver with a history of avoiding accidents, that extra cost could add up to more than you'd ever pay in deductibles.

It's always a good idea to review your policy regularly to make sure you're not paying more than you have to with your current policy. Check out Experian's auto insurance comparison tool to compare your existing policy with top providers in minutes and get quotes that could save you money.