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How much deductible savings justify the extra risk?
Is there a good way to compare the annual premium savings from raising a deductible with the extra amount I’d have to pay after a claim? A repair could end up just below or above the deductible, and it’s hard to know how often that might happen.
Would you evaluate collision and comprehensive deductibles separately, since the savings and likely repair costs may differ? I’m curious whether people mainly look at claims they might realistically file, or at whether they could comfortably cover the higher deductible either way.
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3 replies
For collision and comprehensive, I’d compare them separately: divide the increase in deductible by the annual premium savings for that coverage. That gives you the number of years of savings needed to equal the extra out-of-pocket cost of one claim. If a claim seems plausible before that point, the higher deductible may be a tougher trade-off; either way, you’d still want to be able to cover it.
Damage at or below the deductible means you pay the full repair bill, so it doesn’t create an insurer-paid benefit. The break-even period is useful for comparing costs, but it can’t predict how often a higher deductible will leave you paying more out of pocket.
The one-claim break-even can understate the cost if there are several covered claims in the same period. For each claim that exceeds the higher deductible, the higher option adds the deductible difference out of pocket, so compare the total of those extra amounts with the premium savings accumulated over that period. How often that’ll happen is still the unknown; there isn’t a reliable way to infer it from the break-even figure alone.