How to Make Insurance Deductibles Work For You

You just purchased a new car and you’re taking your first trip to the grocery store. You get to the parking lot with your pristine vehicle and start to panic. Cars race through the lot oblivious to anyone but themselves. Huge pickups block your view when you park next to them, making it difficult to back out.

Your car doesn’t have a scratch on it and you’d like to keep it that way. One reason is, of course, you love your new beauty. But another is that you remember you’ve got a $1,000 deductible on the collision insurance.

If one of these parking lot speed demons hits you while you’re backing out of your parking space, straining to see around that pickup truck, you pay the first $1,000 of damages. So you park away from all the other cars in an isolated part of the lot. You do what you can to minimize the risk of damage to your car.

This means that from your insurance company’s point of view, you have skin in the game. Your car insurance contract assumes that you will drive safely. And protect yourself and your car from damage. This is what “moral hazard” is all about.

A moral hazard is a situation where a party to a contract has the opportunity to gain from acting against the principles of the agreement. Think of the situation above where there is no deductible. You might think, what do you care about where you park your new car? If it gets dinged, you don’t pay anything, your insurance company will pick up the tab.

This is why your car, home, boat, and business insurance policies have a deductible. It’s a way for insurance companies to lessen the risk of a moral hazard.

But there’s something else at work here. Yes, the companies gain if you protect yourself from losses. But you also get discounted premiums. And the savings may be more than you think.

For example, let’s say you save $150 by raising your collision deductible from $500 to $1,000. You might worry that you’d have to pay that additional $500 in the event of a loss. But think of an item you own whose value is $500. Would you pay $150 per year to insure something worth only $500? Of course not.

Call us for a car insurance requote with a higher deductible. Same goes for your homeowners insurance. We think you’ll be surprised at the savings you’ll enjoy. And if you’re a bit nervous about taking on that additional risk, think of the savings relative to the risk. It’s usually just not worth it to pay for those lower deductibles.

So take a look at your car insurance, home insurance, and other personal insurance policies. If you’ve still got some low deductibles, give us a call. We’ll let you know how much you’ll save and then you decide.

And if we don’t have your insurance now, no problem. We’ll personally go over your policies with you. Then make recommendations and make sure you’re getting all the credits and discounts you deserve. Our goal is to get you the right insurance for the best price.

By the way, you can start saving right away by increasing deductibles mid-term. Give us a call today!

Until next time,
Your SZW Team

SZW Insurance is your Utica area Trusted Choice™ independent insurance agent. Call us for a quote on insurance for your home, car, business, or life at 315.792.0000. Or request a quote here.