Insurance Deductibles: High vs. Low

FOR IMMEDIATE RELEASE
Orange Park, Florida, United States of America (Free-Press-Release.com) August 31, 2011 -- Having a high deductible for auto insurance can get you a low quote; but it means that in the event of a claim, you will pay more out of your pocket, especially if you have a long payback period. The payback period is the time you would take to buy back the deductible from the insurance premium savings. Depending on this timeframe, it may not be financially wise to have a higher deductible.

For example: if you have an auto accident and your deductible is $2,000, the insurance will only cover costs above that amount; you must pay any costs that are $2,000 and under. If you do not have this money saved for such occasions, it could wreak financial havoc on your household.

By calculating the payback period, you can know if a high auto insurance deductible is right for you.

1) Calculate the retained risk:
New deductibles – Original Deductibles = Additional Retained Risk
2) Calculate Savings:
Original Premium – New Premium = Savings per Year
3) Determine the Payback Period:
Additional Retained Risk/ Saving per Year = Payback Period (in Years)
4) Evaluate the Payback Period:
Compare the results you get in order to know whether your payback period is good for you.

Consider this rule of thumb when considering a high deductible—a payback period of less than five years would be less risky than a payback period greater than five years.

If you need help determining which deductible would be better for your situation, call us at Fidelity Insurance Group today! (800) 494-0810

Fidelity Insurance Jacksonville Group

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