What Happens if You Can’t Pay Your Car Insurance Deductible?

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When you're involved in a car accident, your health is your most immediate concern—but your finances are a close second. Even if you're well-insured, the costs of a car crash can easily mount. The cost of your deductible alone might be enough to pose a problem if you're short on cash at the time of your accident.

If you can't pay your deductible, you have a few options to consider.

How Does a Car Insurance Deductible Work?

Auto insurance has two main costs: your premium and deductible. Your premium is what you pay each month to keep the coverage policy, and your deductible is the amount you'll have to pay out of pocket for auto repairs before your insurance coverage kicks in.

Deductibles can range from a few hundred to a few thousand dollars. A policy with a higher deductible will be cheaper than a similar one with a lower deductible, and vice versa. Drivers looking to save money on a monthly premium may ask their insurer to raise their deductible, with the risk being that they'll pay more out of pocket if they're involved in an accident.

Should you ever get in an accident, the insurance claim process will work like this:

Let's say your deductible is $500 and an accident causes damage that will cost $2,000 to repair. You will have to pay the first $500 of repairs, and the insurance company will cover the remaining $1,500. If repairs cost less than $500, you will be responsible for paying those costs on your own.

When your insurance provider pays out claims—it may send a check to cover the cost of repairs to you or to your mechanic—your deductible will be taken out of the total.

What to Do if You Can't Afford Your Insurance Deductible

If you can't afford your deductible, there is a chance you won't be able to begin repairs right away.

If your insurer requires your deductible be paid before they issue the remaining funds for a claim, you will need to find a way to pay it upfront. If you have until repairs are completed to come up with the money, you have some time to figure out where you'll get it. Consider the following options:

  • Wait to file your claim. If you are between paychecks, or have money coming in soon, you could wait to file your insurance claim. This way you'll have money in hand once it comes time to cover the deductible. If the accident was severe, waiting could extend the time you're without a car. If your vehicle was towed or is already at the mechanic, make sure you know how long your car can be stored and what it'll cost you.
  • Negotiate with your mechanic. If your insurer plans to issue you a check for the repairs, you may be able to negotiate with the mechanic and ask them to waive your deductible. In this case, they would just take the funds from the insurance company, effectively giving you a discount for the amount of your deductible.
  • Think about whether the repairs are critical. There are many different types of accidents, and you may not need to fix your car at this moment. If the damage was just cosmetic, and the car is still safe to drive, consider not filing a claim at all. It may be worth the $500 savings (or whatever your deductible amount is) to not file the claim, if you can't afford the expense.
  • Tap into your emergency savings. A severely damaged car could prevent you from, say, getting to work. If this is the case, and you have an emergency fund, now is the time to use it. Accidents are emergencies, and paying your deductible could be the difference between having transportation and not. If you aren't already saving for emergencies, consider starting a rainy day fund that helps you protect against situations like this. Putting even $50 per month in an account can add up over time and give you a cushion should anything like a major car repair come up.

Consider Taking Out a Loan to Pay Your Deductible

If the damage on your car needs to be repaired ASAP, you could consider taking a loan to cover your deductible. Whether through a personal loan, cash advance on your credit card or some other form of credit, borrowing could help you get your car back on the road more quickly.

Going through an online-only lender, for example, could allow you to complete the entire process of getting a personal loan entirely from your phone or computer. Funding for many of these loans can come as quickly as one or two days after approval, which could help you get the ball rolling on repairs.

When looking over your borrowing options, be sure to consider the interest you'll pay on the loan. A high-interest loan can make borrowing to cover a deductible a much more expensive endeavor. Get preapproval through multiple lenders to see which one can offer you the best terms and the lowest interest rate before you borrow. Experian CreditMatch™ can help you do this. Even a low-interest loan will cost you interest, though, but it's likely to be worth it if you need your car for work or school.

Try Lowering Your Deductible

Planning ahead is key, and the right insurance policy can help you land a deductible you can afford.

Though a lower deductible can jack up your monthly premium, it might be worth the added costs if you don't have emergency savings or feel you wouldn't be able to shell out a higher deductible if an accident were to happen. Although it adds to your monthly expenses, it could be worth it if it means being able to repair your car quickly after filing an insurance claim.

Reconsider your deductible to see if you think you could actually afford to pay it should you get in an accident. If the answer is yes, a higher deductible can reduce your monthly payments and free up cash to use for other things, like paying down debt.

But remember, if you get in an accident and can't afford your deductible, it may end up costing you more in the long run. If you're unable to go to work, you may lose income, and if you need to get around without a car, you may have to rely on expensive alternatives.

You can lower your deductible by speaking with your insurance provider and finding out how your premium will change if you increase or decrease your deductible. Based on what they tell you, you might ultimately decide that your deductible is already in a good place.

Other Ways to Save on Insurance

Insurers in most states will look at what's called a credit-based insurance score when deciding your premium. These scores use a person's traditional credit scores and other factors to help determine how likely a policyholder is to file an insurance claim. Having good credit could help get you a cheaper policy, so make sure to know where your score stands before shopping for insurance.

You can get free credit monitoring from Experian so you can look after your score and take steps to improve it before going to get new coverage.