If you’re anything like us, you could use some help when it comes to understanding auto insurance. Sure, you know you need it, but if anyone asked you to actually explain a deductible, well, let’s just say you wouldn’t feel overly confident.

Thankfully, State Farm® helps make auto insurance easier to understand. Because the key to choosing the right policy is knowing what you’re getting—especially when it comes to coverages and deductibles. Understanding both can help you see you they affect your insurance overall, so you can personalize your policy to fit your needs and your budget. Make sense? Great. Now, let’s get into it.

What is a deductible in car insurance?

Simply put, a deductible is the amount that you agree to pay up front for a covered insurance claim. You often see deductibles on collision and comprehensive coverages, although there are other coverages that have deductibles depending on what’s available in your state.

For example: let’s say you have a covered loss and the cost to repair your car is $2,000. If your policy has a $500 deductible, you will be responsible for the first $500 and your insurer will pay the remaining $1,500.

How do car insurance deductibles work?

When purchasing your car insurance policy, you get to select a deductible. The deductible applies each time you file a claim. According to Kelley Blue Book, the most common deductible is $500. When choosing your car insurance deductible, think about how much you’re willing to pay out of pocket if you have a covered loss. Weigh that against the fact that higher deductibles generally mean lower premiums, but higher out-of-pocket costs. And lower deductibles generally translate to higher premiums.

It really comes down to your financial situation and what you’d feel comfortable paying out of pocket in case of an accident. You can ask a State Farm agent to run quotes with different deductibles so that you can compare and make the best choice for you.

When do you pay your car insurance deductible?

Your deductible may apply when you use your policy for a covered claim, typically at the time of repair of your damaged vehicle. If you were involved in an accident and another party was found at fault, you may be able to go through their insurance company for your repairs with no deductible incurred.

What car insurance should I consider?

Unfortunately, there’s no black and white answer to what car insurance you may need. It depends a lot on what coverages you need and the amount of deductible or policy limits you feel comfortable with. A State Farm agent can help you understand coverages and deductibles, compare options and find a policy that fits your needs and budget.