Oh boy. Where do I start with this one? 

Sometimes, this concept meets with resistance from policyholders. The thought of paying more in the event of a claim is off-putting to some. Even if that means I pay more for my insurance.

There is a sweet spot where a proper deductible pays off in the short - and - long run.

Before providing an example, let’s look at some statistics. The Insurance Information Institute parses data from across the country every year. Before I share a number with you, I’ll grant you that our area experiences a higher-than-average comprehensive frequency because of deer and other wildlife.

However, the average person has a Comprehensive and/or Collision claim (ready?) every:

• 11 Years

That means there are 10 years between the average person’s last and next claim.

So, with that in mind, let’s look at a real-world example:

• Dan and Roxy have two relatively new vehicles with $500 Comprehensive and Collision deductibles. 
• Their insurance policy premium is currently $2,053 per year.
• If they increased their deductibles to $1,000, they would save $407! 
• Increasing their deductibles by just $500 saves them $407 every year! 
• Even if they had a claim tomorrow, the savings would pay for the difference in about 15 months.
• If they were to increase their deductibles to $2,500 they would save $730
• Increasing their deductible by $2,000 would cover the increased cost of the deductible in less than 3 years.

Multiply the savings over a 10-year period and:

• $1,000 deductible saves Dan & Roxy $3,000
• $2,500 deductible saves $7,300

The savings from higher deductibles depend on several factors, most notably the cost of your comprehensive and collision, the value of your vehicles, and their repair history. 

Regardless, here is a truth regarding insurance of any kind. This is a Ryan Agency mantra:

“It doesn’t pay to trade small dollars with an insurance company.” 

Take responsibility for the small stuff and transfer the risk of the big stuff.

Raising your deductibles immediately reduces your premium, but there’s an added benefit that we’ll discuss in Tip #5! Stay tuned!