Car Insurance Deductibles – What Are They and How Do They Work?

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If you have bought car insurance for your loved automobile more than once, you must have heard the term “deductibles” several times by now. If you are a newcomer to the world of car insurance, you must have heard your advisors or family and friends telling you to get a higher deductible for your upcoming car insurance plan. As evident, deductibles are a rather important part of any car insurance plan that a car owner ever buys. To not only buy better but also to save money on your insurance plan as well as car repairs over time, one must have a complete understanding of car insurance deductibles – what they are, how they work and how should you approach getting deductible for your car insurance. 

What are Common Car Insurance Deductibles?

A deductible is a common term used in all general insurance plans available around the world. It is a part of almost every type of general insurance plan you would buy. In the case of car insurance or otherwise, a deductible is the pre-decided amount of money that you are required to pay for your car repairs before the insurance plan starts to cover the rest of the expenses. Deductibles come into the picture as soon as you apply for a car insurance claim against your policy. The payment of deductibles, the amount you pay and when you pay is largely circumstantial and may change frequently. The bottom line is that the costs to be covered by your insurer for your vehicle damages begin after the complete payment of the payable deductible amount. 

Types of Car Insurance Deductibles 

Common car insurance deductibles can be classified into two main types. Some car insurance plans come with a pre-decided set of deductibles, some may come with an option to get them with both these types of deductibles. Let’s understand a bit more in detail about the two kinds of deductibles:

Fixed or Compulsory Deductibles: Compulsory deductible is a deductible amount that the insured as to pay as a mandatory part of the plan. The compulsory or mandatory car insurance deductibles in Dubai is calculated based on the condition of the engine of the car in question. It is also a way to encourage good driving behaviour among people. As the name suggests, the compulsory car insurance deductible cannot be modified by the policyholder.

Voluntary Deductibles: This is the kind of car insurance deductible that you can have a complete hold on. Voluntary deductibles reduce or increase the price of your car insurance plan. The policyholders can generally choose the percentage of the total claim amount that they would like to pay as deducible in the future. The voluntary deductible amount that you pay was supposed to be paid by the insurer themselves. But since you are volunteering to pay it yourself, the insurance company goes ahead and offer a discount on your premium in return for sharing a part of the total payable claim amount as deductible. Another important thing here is that you can choose a separate amount or percentage of deductible for different covers in your car insurance plan. This gives you the freedom to choose car insurance deductibles smartly – in a way that benefits you. 

How Do Deductibles Work?

The way deductibles work in car insurance is pretty simple actually. Whenever you make a car insurance claim against your active insurance plan, the insurance company starts to pay for the expenses after the deductibles have already been paid by the policyholder. Average car insurance deductibles are generally applied every time you make a claim. Assume that your car insurance plan comes with AED 500 mandatory car insurance deductibles and you have opted for another 2% cost as voluntary deductibles. Now, if you submit a claim of AED 10,000, your insurance company will only cover the amount that remains after you pay the mandatory AED 500 deductible and the 2% of the remaining cost after that. 

As mentioned before, deductibles need to be paid in full before the insurance company starts their coverage. If the claim amount is lower than the total deductible set in your car insurance plan, you will end up paying the complete repair expenses yourself. So, it is always better to calculate your repair expenses and figure out the deductible cost before you submit a claim. 

Also Read Car Insurance with Passenger Cover – Who and What is Covered?

How Will Deductibles Impact Your Car Insurance?

Deductibles can have a huge effect on your car insurance plan coverage and prices – both directly and indirectly. Voluntary deductibles will directly make your plan cheaper or expensive. The higher the voluntary deductibles you choose, the cheaper your premium will become. The math is pretty simple in this case. However, the situation is a little different with mandatory average car insurance deductibles. 

Mandatory deductibles have no direct impact on your car insurance premium. However, it ultimately aims to make car insurance more affordable and encourage you to drive safer. Since the mandatory car insurance deductibles are decided based on the condition of the engine of the vehicle to be insured. This means – the better care you take for your car, the lower mandatory deductibles will be. A good driving record in the UAE is ultimately rewarded by several kinds of discounts and value-added services by the insurance company. 

Why Are Deductibles Added in Car Insurance Plans?

If you are wondering about the initial need for common car insurance deductibles, you will have to consider things from the perspective of the provider. If a person is driving a vehicle knowing that either the insurance company or some other entity will bear the complete cost of the damages, if there are any, they tend to get careless. Careless driving ends in accidents, more often than not. The concept of deductibles introduces a sense of responsibility on part of the drivers and owner of the vehicle. This responsibility ranges not only to safe driving but also to make sure that the vehicle is always kept in a good condition. 

When Am I Liable to Pay Car Insurance Deductibles?

The good thing is that you are not always liable to pay deductibles even if the insurance company is taking care of the repair expenses for your expenses. You are only liable to pay the car insurance deductibles when you are at fault for the accident or in a collision case where a third party is not involved. If the claim you have submitted is related to an accident where the third party is at fault, the insurance company will cover the complete cost of the repairs and then reimburse them later from the insurer of the third party. 

High or Low Deductibles – Which Should You Choose and Why?

Now that you are well-informed about the complete concept of deductibles in car insurance plans, the final question remains – high or low, which kind of car insurance deductibles should you go with? The answer to this question is fairly technical and quite circumstantial as well. Following are a few things you need to consider when deciding on the deductible amount for your car insurance plans:

How much can you afford to pay as a deductible?

Taking on a very high voluntary deductible can cause problems if you can not afford to pay for the expenses. Since most providers calculate this type of deductible in percentage form, you won’t always have an exact idea of the expenses that will go out of your pocket if you make a claim. So, make sure that you only take on car insurance deductibles that you can easily afford to pay, no matter the scenario. 

Read More: Things to Keep in Mind Before Submitting Car Insurance Claims (مطالبة تأمين السيارة)

Is your primary requirement to get a cheap car insurance plan?

Determine what your requirements are when it comes to your car insurance plan. If all you need right now is the cheapest possible car insurance plan then going high on car insurance deductibles may not be a bad idea. However, you must take into consideration the possibility of an accident at all times, no matter how good of a driver you are. Make a decision only after considering both these things and find a sweet spot. 

What is your driving record like?

Your driving record and habits can help you a great deal in deciding the amount or percentage of deductibles you should go with. If you have a great driving streak, do not get into accidents or drive your car barely, you may go ahead and choose a higher deductible amount. Although, check your out-of-pocket paying capacity. The very uncertain nature of accidents leads the discussion in every situation. Always calculate if you will be able to handle high car insurance deductibles in case of an accident. 

Should I Simply Get a Car Insurance Plan without Deductibles?

Apart from the mandatory deductible amount, you can simply choose to get car insurance without opting for voluntary car insurance deductibles. The premium of such plans is the highest of them all. Only choose this option if you think that you will be able to utilise all the benefits that you are paying in full. The decision will ultimately lie upon the fact – how much are you willing and able to pay out-of-pocket and how many or how big of claims do you make. 


Car insurance deductibles can be used for your advantage given that you properly understand them and know what you can spare to pay out of pocket. A deductible amount that is both under your paying capacity and also helps in reducing the cost of an insurance plan is the best choice here. Calculate your expenses and make sure you do not go overboard with deductibles. A fair combination of both the things mentioned above should be your goal. 

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