Comments on: Does Raising Your Car Insurance Deductible Really Save You Money?

By: Brett Cohrs

Brett Cohrs — Thu, 04 Mar 2010 16:28:40 +0000

Good post! I’m hijacking an idea or two. A higher deductible combined w/ some discipline (i.e. emergency savings fund set aside specifically for deductibles) is a great little way to save a little cash.

By: Chris Vogt

Chris Vogt — Wed, 03 Mar 2010 22:41:45 +0000

Kae, thanks for the comment and great question. Yes, the payback method can be used for choosing an economical homeowner insurance deductible as well. Typically homeowner insurance claims occur less frequent than car insurance claims and the general rule thumb for homeowner insurance is if the payback calculated in Step 3 is less than 7-10 years, it is a good economical decision to raise the deductible.

By: Kae

Kae — Wed, 03 Mar 2010 17:35:39 +0000

Very helpful, Chris. I’d not thought to look at it in this fashion. Would you suggest the same formula for home insurance deductibles as well?

By: Chris Vogt

Chris Vogt — Wed, 03 Mar 2010 14:59:32 +0000

Joe,

You are right. The time value of money (inflation) would make a difference in the payback period calculation. For most personal auto policies the inflation affect in the calculation should be minimal but inflation would be more important for bigger insurance policies with higher premiums. Great observation!

By: Joe Heidler

Joe Heidler — Wed, 03 Mar 2010 14:23:59 +0000

I would think that the time value of the money would come into play as well. It’s better to have that extra $100 in my wallet now than having to pay out $100 a year or more from now.