Saturday, September 22, 2012

Deductibles My dear Watson!

Ok any body get my nerdy reference?  I read all the Sherlock Holmes books when I was a kid and I love the new show Elementary .  Anyway, let's talk about deductibles on your insurance.

I recently had a friend call in with a windshield claim and he was upset that he had a $100 deductible. He told me he though I had sold him a good policy and why did he pay me thousand of dollars a year and still have to pay a deductible.  Well her is the deal.

The higher the deductible the lower your insurance rate. In this case he saved about $30 a year, he has had 3  or more cars insured with us  for 10 years and this is his first windshield claim. Let's do the math, we will be conservative and say on the all three cars he has saved a total of $50 a year for 10 years so he has saved $500 so he has $400 left in his imaginary wallet after paying this claim.  I think that was a good agent, saving him $400, heck I make more money with lower deductibles, I was looking out for my client-not me.  How often does one have a windshield claim? An industry expert tells me it is a 5% chance of having a windshield claim in any given year.  That means once in 20 years for a single car.

The numbers vary, you won't save as much with a higher deductible on a Camry (pretty low insurance cost anyway) but more on a Corvette (pretty high insurance cost) the savings is  a percentage of  the base rate.

On property insurance (homeowners, rental buildings, etc.) the saving can be HUGE.  I recently insured an apartment complex and the difference between a $5,000 dollar deductible and $2,500 deductible was, wait for it, $2.500.  That's a no brainer every year they don't have a claim they save $2,500.

"Wait a minute" you say, "that's why I have insurance, to take care of things whenever I have a problem".  I'm going to tell you a secret, insurance companies are in business to make money and if you have a lot of little claims you are labeled as claims conscious and you get dropped like a hot potatoe!

What about that neat vanishing deductible we here a couple of the famous fictional insurance spokes people (what's wrong with that statement anyway!) speak of?  Listen to the fine print!  You pay extra for that! It is just a bell and whistle for the mathematically challenged.  The companies know they will make more money if you chose that vanishing deductible. Don't play their game, keep your money!

If you want some more advice on deductibles you can do a couple of things, watch our youtube on it or give on of our agents a call.

We are happy to represent these fine companies:  Erie, Auto-Owners, GMAC, Safeco, Foremost, and more!