Insurance Deductibles: Where is the Tipping Point?

by bigcajunman on March 26, 2012

So thanks to our Church being robbed, the idea of High insurance deductibles is weighing on my mind.

What is the “tipping point” for insurance deductibles? (sorry I love mis-using that term, just like the real media). If you set your deductible high enough, you may as well not even have insurance (which is kind of what I learned from our Church’s experience, after it was robbed), whereas if you set your deductible too low, you end up paying an inordinate amount of money in Insurance Premiums.

The example of my Church: some “scum bag” stole a laptop computer, which was being set up for a presentation.

The insurance deductible for the Church was set so high, the Church could not make a claim (since the laptop price was much lower than the deductible). I was told that if we had the deductible been set low enough to give some money for the laptop, the premiums would be approximately double what they currently are (paying). We did make a police report and such, so in fact we may end up with a higher insurance premium (because the Church is being robbed (interesting twist of fate)).

My problem with this whole deductible quandary, is that the insurance becomes effectively useless except in dire circumstances (i.e. your car is stolen, your house burns down, etc.,), if your deductible is set high (to save on insurance rates). I end up self-insuring for little things like bicycles being stolen from my garage (another “scum bag” moment), or things like that.

My guess is that where to set your insurance deductible is a personal choice at the end of it all.

Anybody got any personal experience where the “sweet spot” for insurance deductibles should be?

{ 8 comments }

{ 7 comments… add one }

My Own Advisor March 27, 2012 at 7:41 pm edit
Insurance is for disasters, not small stuff.

I guess it depends on what you classify as small stuff.

The fact that your Chruch was robbed, is horrible. WTF is wrong with people??

Sad world.

Mark

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Joe March 26, 2012 at 9:16 pm edit
I think Laura’s got it very right. An emergency fund is a form of self-insurance. “Acceptance” of risk is a very legit risk management tactic, so long as you’ve considered the possible outcomes. You should insure yourself against any significant catastrophic loss. Insurance is just a reverse lottery; it pools risk and the insurance company takes a profit off the top. If the risks are small – e.g. pet insurance, extended warranties – then it’s almost never a good idea to insure.

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Laura March 26, 2012 at 6:36 pm edit
Well, my take on insurance is that it’s for disasters, not minor expenses. It’s annoying but not financially devastating to have to pay $1000 out of savings for a stolen laptop that isn’t covered by a deductible. It’s not an option to pay several hundred thousand dollars when your house burns to the ground, though. That’s what insurance is really for, and I keep my deductibles very high to keep my premiums low. Considering I’ve never had to make a claim, I’ve easily saved the difference in premiums that I’d have to pay in a deductible if I do have to make a claim in the future.

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- bigcajunman March 26, 2012 at 7:08 pm edit
  That was my guess on how folks might respond, an interesting idea.
  
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Marianne March 26, 2012 at 11:37 am edit
This is my biggest beef with insurance. You have to have it but you’re dinged if you use it. It’s feels like I’m being robbed!!

Our church used to get robbed all the time. It is ironic eh? Because they are such public places it is easy for people to get in there or figure out how to get in there. Churches are supposed to cater to broken people, some of whom are accustomed to stealing etc., so they bring those people in to minister to them and then they see all of the expensive equipment and where it’s kept and the bulletin tells them when people will/ will not be there etc… It’s a bit of a catch 22.

A few high-end guitars were once stolen from our church. One of them was extremely unique. The musician who owned them was repaid by the church and replaced his instruments and life went on. A couple years later my husband was providing the music at a party (we were in our late teens) and someone struck up a conversation with him about these great guitars he had and would my husband be interested in them? He described the instruments that had been stolen to the exact detail. My husband held on to his own guitar a little tighter.

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Michael James March 26, 2012 at 9:28 am edit
I find higher is usually better. For a church, if there was risk pooling at higher church levels, a deductible of $10,000 would make sense. Having a lower deductible won’t stop the scumbag from stealing the laptop. Insurance companies feed on the illusion that their coverage actually prevents bad things from happening.

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- bigcajunman March 26, 2012 at 9:59 am edit
  True, it is almost as if you need to have a “slush fund” on the side that could cover the deductible (or lower costs) when you try to use the insurance.
  
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