Zero-deductible car insurance: What it is, what it costs, and whether it’s worth it

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Zero-deductible car insurance means you’ve chosen coverage options with no deductible, so when you file a covered claim, you don’t pay anything toward it first — your insurer covers it from the first dollar. In return, you pay a higher premium.

A deductible is the amount you pay yourself before your insurance kicks in, and it gets subtracted from your claim payment. It’s also how you and your insurer split the risk: when you agree to cover part of each claim, your premium goes down. Drop the deductible to zero and your insurer carries all of that risk, so it charges you more. 

A lower deductible means lower out-of-pocket costs but higher rates, and a higher deductible means the reverse.

What is zero-deductible car insurance?

Zero-deductible car insurance is a setting on your own auto policy, not a separate product you buy. You’re choosing the lowest possible deductible — $0 — on the coverages that let you pick one, which means your insurer pays a covered claim from the first dollar.

A deductible is the amount you’re responsible for paying toward a covered loss, and your insurer subtracts it from what it pays you. Choose a higher deductible and you take on more of each claim in exchange for a lower premium; choose zero and you take on none of it, which costs more. 

How does a car insurance deductible work?

Your deductible works one coverage at a time, so a single policy can have more than one. Different coverages can carry different deductibles, and the amount on one doesn’t change the others.

Here’s where deductibles live on a typical policy:

• Collision pays to repair your car after an accident, no matter who’s at fault, and you choose its deductible.
• Comprehensive covers non-crash damage like theft, weather, and animal strikes, with its own separate deductible.
• Liability pays for injury or damage you cause to other people, and it usually has no deductible at all.

Because each coverage stands on its own, setting one to zero leaves the rest untouched. You might run a $0 deductible on collision and keep a deductible on comprehensive, for example.

Which car insurance coverages can have a zero deductible?

You can only set a zero deductible on the coverages that let you choose one in the first place: collision and comprehensive. Deductibles apply to property damage, not to the liability part of your policy.

• Collision and comprehensive can have a zero deductible, because they carry a deductible you select.
• Liability has nothing to set to zero, since it pays for harm to others rather than damage to your own car.

So when people talk about “zero-deductible car insurance,” they almost always mean their collision and comprehensive coverage.

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Does zero-deductible car insurance cost more?

Zero-deductible car insurance usually costs more than the same policy with a deductible. A lower deductible comes with higher rates, and a higher deductible comes with lower rates. Since zero is the lowest deductible you can choose, it comes with the highest premium.

When you carry a deductible, you cover part of every claim yourself, and this is how you share risk with your insurer — which is what earns you a lower premium. Take the deductible away and your insurer covers that part too, so it charges more. The money you’d have paid as a deductible doesn’t disappear; you pay it through your premium instead, month after month, whether or not you ever file a claim.

How much can your deductible change your premium?

Raising your deductible is one of the quickest ways to lower your premium. The Insurance Information Institute says raising your deductible from $250 to $500 can cut your collision and comprehensive costs by 15% to 30%, and going to a $1,000 deductible can save 40% or more. Consumer Reports, citing an Insurance Information Institute (III) spokesperson, says moving from a $500 to a $1,000 deductible lowers premiums by about 20% to 25% on average.

Choosing a zero deductible means giving up those savings and paying more instead. For a sense of the typical numbers, Mercury Insurance says the most common deductible is $500, and many insurers offer deductibles from $100 to $2,000.

Zero deductible vs. low vs. high deductible: how do they compare?

The choice comes down to one thing: pay more every month, or pay more after a claim. Here’s how the three common options stack up.

When does a zero deductible make sense?

A zero deductible makes sense when paying for repairs out of pocket would put you in a tough spot. Could you afford the deductible if you had an accident? If you couldn’t, a lower or zero deductible takes that worry off the table.

A zero or low deductible is a good fit if:

• Covering a repair bill after an accident would strain your budget.
• You’d rather pay a steady premium than risk a surprise expense when you file.

A higher deductible is a better fit if:

• You have enough saved to cover a larger share of a loss yourself.
• You’d rather take the premium savings, since a higher deductible can cut collision and comprehensive costs by 15% to 30% or more.

How do you choose a zero-deductible policy?

You set your deductible when you buy or adjust your policy, coverage by coverage — there’s nothing extra to purchase. These steps keep it straightforward:

• Look at your savings. Figure out how much you could pay out of pocket after an accident before you settle on a number.
• Check each coverage. Collision and comprehensive are where you choose a deductible; liability doesn’t have one.
• Compare the cost. Weigh what a zero or low deductible adds to your premium against the savings a higher one would give you.
• Get a few quotes. Prices vary between companies, so comparing insurers helps you find the best deal.

Nupur Gambhir

Managing Editor

 

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Nupur Gambhir is the editor-in-chief of Insure.com and a licensed life, health and disability insurance agent in New York with seven years of experience covering insurance. Her expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Balance, The Financial Gym and MSN. She holds a BA in Economics from The Ohio State University.