How do you decide your insurance deductible?

[MooseBucks]

With all the talk about Comprehensive & Collision I started to think about how to determine the correct deductible to choose. How did you decide what to set your deductible at? I'm wondering if the best way is similar s deciding when to drop comprehensive and collision? ie...if the rate for that item drops 10% of the increase in deductible then go with the higher deductible? Do you choose your homeowner's deductible the same way as your car insurance? Is one more risky than the other so you're more comfortable with a higher deductible?

[Nutria]

We never do any analysis. For both Auto and Homeowners, we always choose $1000 deductible, since (1) we can afford it, and (2) it significantly lowers the cost.

EDIT: wind insurance has a fixed $10K deductible, so there was no choice...

[kork13]

I generally just go with the highest deductible that I can reasonably tolerate, unless getting the lower deductible is a negligible difference in the rate (rarely the case). I figure that insurance is for major losses (because if you claim every minor issue, you'll either get dropped/blacklisted from the company, or your rates will skyrocket). As I see it, in the rare circumstance that I suffer a loss significant enough to make an insurance claim, it's likely at least a $10k loss or (often) more. Shaving $1k off the top is small beans, and partly what an EF is there to help cover.

Besides, the difference in premium often well exceeds the savings in the deductible. Going from a $1000 deductible to $500 on a home or auto policy might cost you anywhere from $50-$150+ per year. How often have you filed a claim? In 15 years, I've filed 1 (when my home was broken into... door kicked open, all the valuables/electronics stolen, ~$9k loss). If I've saved $100/yr in premiums, I will have saved more in premiums than I spent on the deductible.

[kork13]

EDIT: wind insurance has a fixed $10K deductible, so there was no choice...

Sounds like a tornado alley insurance policy...

[MooseBucks]

We never do any analysis. For both Auto and Homeowners, we always choose $1000 deductible, since (1) we can afford it, and (2) it significantly lowers the cost.

EDIT: wind insurance has a fixed $10K deductible, so there was no choice...

Can you quantify what you consider a significant reduction? For comprehensive coverage on my car to go from $100 deductible to $1000 would save me $57.04/yr. On my other car it is $43.32 a year. Most of the savings is seen when I raise it to $500 and going from $500 to $1000 only saves me a total of $24.94 per year for both cars combined.

I'd save $75 a year to take on $400 of additional risk for both cars, but only an additional $25 to take on an incremental $500 in more risk.

[Nutria]

Sounds like a tornado alley insurance policy...

Hurricane region.

[Nutria]

Can you quantify what you consider a significant reduction? For comprehensive coverage on my car to go from $100 deductible to $1000 would save me $57.04/yr. On my other car it is $43.32 a year. Most of the savings is seen when I raise it to $500 and going from $500 to $1000 only saves me a total of $24.94 per year for both cars combined.

I'd save $75 a year to take on $400 of additional risk for both cars, but only an additional $25 to take on an incremental $500 in more risk.

I don't remember the numbers, but it was a lot more than that.

[~bs]

I find it interesting that people seem so concerned with comprehensive and collision coverages. Those are the least of your worries, your potential losses are limited to the value of your vehicle.


Your real potential liability and losses are with liability coverage & uninsured medical; bodily injury and personal property. In my humble opinion, those are not coverages you want to skimp on. State minimums are something like 10-30k (depending on the state). You will pay out of pocket if you cause personal injury or property damage in excess of your coverage. If an uninsured/underinsured driver (with minimum coverages) injures you, you will pay out of pocket for your own medical expenses in excess of any coverage he may or many not have & medical insurance.

[Nutria]

Your real potential liability and losses are with liability coverage & uninsured medical; bodily injury and personal property. In my humble opinion, those are not coverages you want to skimp on. State minimums are something like 10-30k (depending on the state). You will pay out of pocket if you cause personal injury or property damage in excess of your coverage. If an uninsured/underinsured driver (with minimum coverages) injures you, you will pay out of pocket for your own medical expenses in excess of any coverage he may or many not have & medical insurance.

You're right. We goosed those up far beyond the state minimums.

[corn18]

I have always carried the max deductible on my cars ($1,000). It has saved me a lot over 30 years and has more than paid for the few times I needed to use insurance.

For my house, my deductible is 1% ($5k). Never had to use homeowners insurance, so that has been a money saver as well.

I'd did this when I was flat broke and still do it now that I actually have savings. Works for me.

[MooseBucks]

I put together this chart that would illustrate the # of years I need to go claim free in order to start realizing any savings.

[MonkeyMama]

We always take the max deductible (which is currently $2k auto and $5k home).

I totally agree with kork. My concern is covering major losses/catastrophes. Having to spend $2k or $5k to replace a car or do a minor home repair is not a big deal in contrast (because we have savings). We've always had ample savings to cover deductibles.

& of course, like I said in that other thread, it's very individual. We've never made an (auto/home) insurance claim (knock on wood). I don't see the point in paying for insurance I am not going to use. If you make a claim every few years, you might come out ahead with more coverage and a lower deductible.

(To be clear, I am totally fine for paying for catastrophic insurance that I will never use. I sleep well at night knowing that one health event, one accident, or one nasty storm doesn't bankrupt us and wipe out everything we have built up. It's just paying insurance for a $10,000 car is very *shrugs* in comparison. If we didn't have the insurance, we'd *shrug* and move on with our lives. Might suck a bit in the very short term, but could easily recover).

[bjl584]

I set mine at $1000.
Going higher didn't provide any drop in premium.

I never have less than $1000 readily available, so I'm comfortable with it.

[msomnipotent]

I just did a major overhaul of our coverage the last time I needed to pay for homeowners insurance. I got quotes for $250, $500, and $1000 deductibles for the cars. I would only save $25 by going from $500 to $1,000, so $500 was it. I also added rental car and roadside assistance and canceled AAA, which saved me about $80 a year. Our medical hadn't been raised since we married almost 20 years ago, so now it is at $300,000 per person per incident.

[snafu]

Moosebucks' asks....'Do you choose your homeowner's coverage and deductibles factoring the same way as your car insurance?'

I hope participants base their insurance coverage and deductibles on their specific circumstances and risk factors like location. Looking at the news reports of on going natural disaster has been mind boggling. Do you have an 'Emergency Fund' to cover higher deductibles and extra, unpredictable B&E expenses without traumatizing your regular cash flow? Do you have photos of your stuff if you needed to verify?

How secure is your home? How vulnerable is it to being identified as a target for mischief? If a renter, do you have appropriate insurance? Do you have sticker suggesting security service whether actually contracted or not? Do you have deadlock door bolts? Do you have motion sensor activated outdoor lighting? Do you occasionally leave your home with a window open? Are lower level windows provided privacy via shrubbery? A dog that barks to announce visitors is also a factor.