How Do Commercial Car Insurance Deductibles Work?

What are auto insurance deductibles?

Your insurance deductible is the amount you’ll pay out of pocket after you file an insurance claim because of an incident with your covered business vehicle.

Deductible amounts vary; you and your insurer will determine your deductible amount when you agree on the policy. However, policyholders can change the deductible amount in the middle of a policy by contacting their insurance carrier.

The deductible shows up on collision and comprehensive claims but doesn’t apply if another car hits you and you need to get your vehicle repaired.

How do deductibles work for commercial auto insurance?

You pay the deductible when you get your car repaired. You’ll usually pay the deductible directly to the auto body shop before it releases your vehicle back to you.

For example, let’s say you were in an at-fault accident that damaged your vehicle and your deductible is $500. Your first step is to file a claim with your insurance carrier to explain the accident’s circumstances. Next, the insurance carrier sends an adjuster to assess the damage and estimate what repairs would cost. In this case, let’s say the adjuster notes $5,000 in damages.

Next, you’ll bring your car to a repair shop and provide the claim information. When your car is fixed, the shop will bill your insurance carrier for the total amount minus the deductible. When you pick up your car, you’ll pay your $500 deductible to the shop and leave with your newly repaired car.

Types of commercial auto insurance deductibles

Commercial auto insurance deductibles apply only to your insurance policy’s comprehensive and collision coverages. You can choose a separate deductible for each coverage to customize your policy.

Collision coverage deductible

Collision coverage pays for repairing or replacing your vehicle if you hit something – a car, building, object or animal – and are at fault in the accident. Collision coverage doesn’t cover damage to what you hit; your general liability insurance covers those damages.

When you claim from your policy for collision coverage, you’ll need to pay the collision deductible.

Deductibles vary from carrier to carrier, but most carriers offer policies that range from no deductible to a $2,000 deductible. Basically, the higher your deductible, the lower your premium will be.

Comprehensive coverage deductible

Comprehensive coverage kicks in for any type of loss other than a collision. For example, a comprehensive claim would cover someone stealing your car, a vandal slashing your tires or a tree branch falling on your car. Hail is another common source of comprehensive coverage claims.

Comprehensive coverage also has its own deductible that you’ll set when you choose your business insurance policies. Like the collision deductible, it can range from nothing to $2,000, depending on the carrier. Also, as with the collision deductible, you’ll pay the deductible directly to the repair shop when you get your car fixed.

What is the average auto insurance deductible paid on commercial vehicles?

Policyholders can select a $250, $500, $1,000, or $2,000 deductible for both comprehensive and collision coverage. The higher the deductible, the lower the cost of your commercial auto insurance. Most drivers tend to take a middle ground, finding the sweet spot between cost and coverage with a $500 deductible.

Those who want additional savings might jump to a $1,000 deductible, while many find that a $2,000 deductible doesn’t provide enough savings to take on so much risk.

What to consider when choosing a commercial auto policy with deductibles

When it comes to your deductible amount, your decision boils down to cost versus risk. As an insurance policyholder, you want to save as much money as possible, so you may be tempted to go with a higher deductible and lower premium.

But when you look at what you’d have to pay out of pocket in a claim, consider whether or not the lower premium is worth it. For many people, coming up with an extra $1,000 for a claim would be difficult. Even $500 can be burdensome.

If the cost savings associated with a higher deductible aren’t substantial, you may be better off with a lower deductible while paying a few extra dollars a month for coverage.

Mark Fairlie contributed to this article.