CHOOSING AN INSURANCE PLAN - LOW AND HIGH DEDUCTIBLE

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LOW DEDUCTIBLE. HIGH DEDUCTIBLE. WHAT’S BEST?

People generally choose a deductible based on their ability to meet that deductible. If you have no problem finding $5,000 to pay the deductible in the case of a major catastrophe, then a $5,000 deductible is a good option. If you think you could only find $1,000 in a crisis, then $1,000 would be a reasonable deductible.

Many folks think that going with a high deductible saves a lot of money. You do save, but sometimes not so much. Note the changes in annual premium for a 30-34 year old male based on various deductibles:

  • $250 deductible = $1,275
  • $500 deductible = $1,120
  • $1,000 deductible = $871
  • $1,000 deductible = $871
  • $5,000 deductible = $632
  • $10,000 deductible = $498

The largest saving of $249 comes between the $500 and $1,000 deductible. Going from $1,000 to $2,500 saves only $99, and from $2,500 to $5,000 only saves $140. In fact, going from $1,000 to $,5000 saves only $239 per year even though you have added $4,000 to the deductible. So increasing the deductible does not produce great savings. Up to the present time, with all companies, the $1,000 deductible seems to be the most cost-efficient.