Auto insurance costs differ depending on the province, but one thing’s the same everywhere: picking the right car insurance deductible is key to getting the coverage that fits your needs and budget. When you’re setting up your insurance, you’ll usually have the option to go with a higher or lower deductible, and that choice can impact what you pay. The right deductible for you really depends on how often you think you might need to make a claim and how much you’d be comfortable paying out of pocket if you do.
What is a deductible?
When you buy car insurance, you’re not just picking the types of coverage you want—you’ll also need to decide on a deductible. A car insurance deductible is the amount you agree to pay out of your own pocket if you ever need to file a claim.
Think of it as the portion you pay before your insurance kicks in and covers the rest of the costs up to your insurance policy limit. Unlike your insurance premium, which you pay regularly—either monthly or annually—you only pay your deductible if you need to file a claim.
Higher deductible or lower deductible?
A deductible is a way for insurance companies to share the financial risk with you. Since a deductible is a form of financial responsibility on your part, a deductible can directly affect your premium.
Choosing a higher deductible usually means a lower monthly premium, as you’re taking on more of that risk. On the other hand, if you go with a low or even no-deductible policy, you’ll likely pay a bit more for coverage.
When choosing whether you want a higher deductible or lower deductible, there isn't a right or wrong answer. What's important is to consider things like your financial situation, how much your vehicle is worth, and your driving habits. We will examine each factor in detail below:
Financial situation
Take a look at what you’ve got set aside in your bank account. If you’re comfortable taking on a bit more financial responsibility, you might opt for a higher car insurance deductible, like $1,000 instead of $500. That way, your monthly insurance payments will be lower, but if you do end up needing to file a claim, you’ll have a bigger out-of-pocket expense.
Vehicle worth
If you’re driving an older car that’s not worth a whole lot, a high deductible might not be the best choice. For example, if your deductible amount is $2,000 and your car is only worth $3,000, you'll only receive $1,000 for your claim. In this case, going with a lower deductible, like $500 or even $250, might be a better option. You’ll pay less upfront, and if you need to file an insurance claim, you'll get more money toward it for repairs or replacement.
Driving habits
If you find yourself making insurance claims fairly often, a low deductible might be a good idea since it keeps your out-of-pocket costs lower each time. This way, if something happens, you won’t have to cover as much before your insurance company steps in.
On the other hand, if you’ve got a clean driving record and rarely make claims, a high deductible could work better for you. Why? It means lower insurance premiums, and since you’re not likely to need to file a claim, that higher insurance deductible can actually save you money in the long run.
What is the disadvantage of having a high deductible?
If you choose a higher deductible, you’ll need to cover more out of pocket if you file a claim than you would with a lower deductible. This could mean delays in repairs if you’re not ready to pay that amount right away. So, it’s important to pick a deductible you’re confident you could afford to pay if needed.
How much is a car insurance deductible?
It depends. Car insurance deductibles vary because you usually get to choose the amount. However, most insurers have a minimum and maximum deductible you can pick from. These typically range from as low as $250 or $0 up to $2,000 or more, depending on your car's value.
For example, in Ontario, the average deductible is between $500 and $1,000, with $500 being the standard for many. But this amount might be too low or too high, depending on your situation. When deciding on a deductible, remember to think about your risk level and your car’s value.
Types of car insurance deductibles
The two main types of car insurance coverage with deductibles are comprehensive and collision (or upset) coverage, each with its own deductible. Usually, people pick the same deductible for both, but you can choose different amounts if you prefer.
Comprehensive coverage is for damage to your car from non-collision incidents—like theft, vandalism, bad weather, or hitting an animal. Collision coverage, on the other hand, covers damage if you hit another car or an object, like a fence or a utility pole.
For both types, the maximum payout is based on the car’s value just before the accident or damage, minus your deductible. Sometimes, your policy’s uninsured automobile coverage might also have a deductible.
Other mandatory coverages, like third-party liability (which pays for injuries or damage you cause to others) and accident benefits, don’t come with deductibles. Depending on where you live, you may be able to increase your third party liability insurance, rather than maintaining the bare minimum, check with your insurance agent or broker before making a decision.
Do you have to pay a deductible for every insurance claim?
Whether you need to pay a deductible in Canada depends on where you live and the type of claim you’re filing. If you’re not at fault in a collision, you typically don’t have to pay the deductible for damage repairs. That would be covered by the other driver’s third-party liability insurance or by your own direct compensation-property damage coverage if you live in a no-fault province. And, as we mentioned earlier, accident benefits claims don’t have a deductible either.
On the other hand, if you’re filing a claim under the comprehensive part of your policy (for things like theft, vandalism, or fire), you’ll likely need to cover your comprehensive deductible. The same applies if you’re at fault or partially at fault in a collision—your deductible would come out of pocket before your insurance covers the repair costs. Additionally, for uninsured motorist claims, there might be a deductible depending on where you live. For example, Ontario requires a $300 deductible for uninsured motorist coverage.
Is it better to have a $500 deductible or $1000?
It truly depends on your financial situation. If you can afford to pay out $1,000 in the event of a claim, then having a higher deductible means you'll likely pay lower monthly premiums. However, if $500 is a safer amount for you financially, then it's best to stick with the lower deductible.
What are diminishing deductibles?
Some insurers in Canada offer what’s called a "diminishing" or “disappearing deductible.” It’s a reward for safe driving, where your deductible gets lower each year you go without a claim—and if you’re extra careful, it could eventually reach zero! Just keep in mind that some insurance providers might charge a small fee for this option.
For example, Aviva has an add-on where your deductible drops by 20% every year you’re claims-free. So, after five years without a claim, your deductible could be down to zero.
Some insurers also have a setup where you can regularly put money into a fund to help cover your deductible if needed, and they might even contribute to it as well. So don't forget to ask your insurer when purchasing insurance about whether they offer diminishing deductibles.
Learn more about car insurance with BrokerLink
Car insurance deductibles can be a bit tricky, but they’re important to understand since the amount you choose now can affect you later. That’s where BrokerLink can help. If you’d like to learn more about how deductibles work or how they impact your premiums, get in touch with us. One of our licensed insurance advisors would be happy to answer any questions about car insurance deductibles.
You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.
Get an auto insurance quote 1-866-724-2372
