Insurance...Take Highest Deductible?

[Tommy_Dolitte]

Happy Saturday guys!  

I'm considering taking the highest deductible possible on my car insurance and then investing the difference.  

I'm confident in the law of averages on this pending decision---thoughts?

TD

"Re-evalutate every rule-of-thumb and understand every "fact"---then smile and reclaim your nuggets!"

 

[KB]

I take the highest deductibles for house and car insurance, and always keep the sum of the deductibles in my emergency Fund. Just in case....

 

[BigMoneyJim]

One thing I keep in mind I read in _Personal Finance for Dummies_, I think, is that insurance is to protect disaster from ruining you, not to protect you from being hurt or inconvenienced. A wreck or house burning down is going to hurt financially. I think all the regulars here understand that, but I thought I'd throw that out there.

I have the $500 deductible car insurance as opposed to the $1000 because the difference in cost was less than $10 every 6 months if I recall correctly (which I may not, but at the time I decided the savings wasn't worth the deductible difference). Now that I think about it I may be confusing current and past policies...I haven't looked at this stuff in 3 years; maybe it's time for a review in coverage, deductibles and premiums....

I have renter's insurance; I don't recall the deductible but I'm paying around $12-$15/month for it.

 

[cute fuzzy bunny]

You'll notice that most large organizations/companies are 'self insuring'. They have enough in assets to operate as a mini insurance company, distributing risk and cause against cost.

Most insurance companies are backed up by reinsurance companies that protect the primary insurance company from major losses. Tiers of risk.

So you have to do the same thing...decide whether you can self insure, or whether you need "reinsurance" in the form of a high deductible policy.

Two metrics: first off, if you drive into stuff all the time or stuff tends to drive into you, or your house keeps getting swept up by a tornado and dropped on a witch, then keep lower deductibles.

As far as how high, see what the price differences are. Lower them if you're really saving money and if you have the financial weight to handle a loss.

I havent ever caused a car accident and I've been bumped into twice...at 18 and 23 with minimal damage. So I keep the highest deductibles on my car.

I only filed one homeowners claim, it was for a small amount, and in retrospect I shouldnt have filed it. I keep the highest deductible on the house too.

Disaster protection.

 

[johnblake]

Same here. I usually go for the highest deductible. With my car, I forgo collission altogether. in 20+ years I've never made a claim against an insurance co. (other than health). I've probably paid around $15,000 auto insurance companies. I like to think about what that would be worth dollar cost averaged into the SP500 over the last 20 years.

 

[John Galt]

Yeah, I'm kind of the same on insurance, i.e. I've paid
in a pile of money with almost no claims (except health).
I too wish I had all that money back now (hindsight).
I just remembered one claim that worked out well.
We live in a flood plain but have no flood insurance
(it's expensive). Anyway, I had a sports car stored in my garage when we had our last flood and it was a
total loss. I collected a fair amount on that. But, that's
why you have insurance. I would guess that since I
retired completely (1998), we would have been way ahead
with no insurance of any kind on anything. I don't have
the guts to actually do it though.

John Galt

 

[Cut-Throat]

I would guess that since I
retired completely (199, we would have been way ahead
with no insurance of any kind on anything. I don't have
the guts to actually do it though.

Unclemick does ! - He's my hero! And when the cost of Health Insurance guarantees my poverty, I'm going it alone.

 

[unclemick]

Just remember - all the women in the household are covered insurance wise and have independant stand alone retirement portfolio's - in case my blockheadness wipes mine out.

 

[John Galt]

Well, unclemick, you are still my hero too, in spite of your disclaimer

John Galt

 

[Hyperborea]

I havent ever caused a car accident and I've been bumped into twice...at 18 and 23 with minimal damage.  So I keep the highest deductibles on my car.

I don't know how you survived in the Bay Area. The drivers here treat the roads like "bumper cars". In the 7 years that I've been here I've had 3 hit and runs on cars parked on the street, 2 serious parking lot hit and runs, a thousand or so minor parking lot hits, 1 rear-ender while stopped at the lights, and 1 side swipe. The 2 non-hit and runs were fully covered by the other driver's insurance but the 5 hit and runs left me paying the deductible. The other drivers were likely uninsured but with a hit and run you can't prove that so no uninsured motorist coverage for that. We don't even drive that many miles - perhaps 8K / year between two adults.

 

[Nords]

Cars are transportation, not art objects.

We drop collision/comprehensive when the car is five years old. The more beat up your car becomes, the more likely people are to stay away from it. (My dream communter car used to be a '67 Comet with rairoad ties strapped to the bumpers, but not commuting at all is much easier.)

The neighbors' 12-year-old minivan was rear-ended last month and the back hatch wouldn't shut. The insurance company "totaled" it for $2200. They paid the premiums for 12 YEARS with no deductible! Ya gotta do the math...

We keep liability, of course. And we keep UIM/UM in case an accident renders our kid in need of lifetime medical care but we'll drop that when we're empty-nesters.

As for home insurance, we've moved from comprehensive to "named perils" with higher deductibles-- $2500-$5000. Insurance companies seem eager to drop homeowners making claims under lower deductibles so we decided not to pay for it. We've also raised our hurricane deductible to 2% since we only seem to deal with them every decade or so.

But if you/family are likely to spend the premium savings, then it's probably better to keep the lower deductibles.

 

[cute fuzzy bunny]

The bay area wasnt bad at all, both of my bumper car experiences were when I lived in Boston...and no surprise there! In fact the biggest problem I have with california drivers is hesitancy. In boston both drivers presume right of way and try to ram each other for the "prime spot". In california both drivers brains short out, they both stop (maximizing the chances of being struck by someone else) and play a game of "you go first...no...you go first!".

Bear in mind I moved out of the bay area in '96, and it got a little more hectic after that.

Nords - I've often suggested that people who get in more than one accident be required to strap tires to the sides of their cars like tugboats. Less for damage prevention and more for recognizability.

One of my friends did have what I think is the best idea. Fill all car bumpers and quarter panels with contact explosives. Everyone would drive realllll carefully. And if they didnt, the problem would be self correcting.

 

[KB]

I have 3 cars which are all more than 5 years old, 2 are worth 10,000 or more and the third car is only worth acouple thousand or so. And I have 2 teenage boys, 18 and almost 17.

I currently have full coverage with a high deductible since I thought having teenage boys, we would be more prone to have a claim.

Is there any portion of auto insurance that I could drop safely?

 

[John Galt]

I dropped collision coverage on everything years ago.
Our newest vehicle (other than my bike) is 7 years old.
Anyway, I kept towing and comp. where allowed, but
never regretted dropping the collision. Saved a pile of money so far.

John Galt

 

[bongo2]

I work in insurance. The answer is yes, highest deductible you can stomach or go bare (most commonly no collision / comp and don't buy extended warantees). The only exception is if you know that you are a worse risk than the insurance company thinks you are (the average person with your age, sex, car, driving history, and credit score). Since nearly everyone thinks they're better than the average this one does not come up much.

 

[bongo2]

I guess I should add, don't go bare on your auto liability. That's risky and against the law.

 

[blazerjeremy]

Along with the contact explosives I have always thought you should take the air bags out of the steering wheel and replace them with 6 inch steel Spikes. This would make driver more responsable in their decisions.

 

[cute fuzzy bunny]

Now if you could just put those spikes on remote control so other drivers could slowly extend them, you'd have something!