Should you increase your deductible?
The answer is YES. But…is it worth the savings?
Read the 3 reasons why you should…AND the ‘Secret Formula’ for deductible decisions.
It will reduce your premium. The amount you will save varies, but often the savings will exceed 10% of the property premium.
It may stabilize your premium. Often it becomes necessary for an insurance company to take a premium increase due to claims. If a ministry maintains a cash reserve for small claims, rather than submit them to the insurance company, that additional profitability to the insurance carrier may be reflected in premium down the road.
It reinforces the primary purpose of insurance…which is, to provide for insured’s in the event of catastrophic events. The more people utilize insurance, the more costly it becomes for everyone. By selecting higher deductibles and only submitting claims that are otherwise financially affordable…everyone wins.
‘Secret Formula’ for deductible decisions.
There is a simple deductible rule of thumb for evaluating whether to increase deductible (for any type of insurance):
1 – Calculate the savings
2 – How many years do you estimate you’ll go without a loss?
3 – Multiply the savings times the number of years. Does that amount exceed the difference between the deductibles? If yes…then the decision is simple. If ‘no’, that doesn’t necessarily mean do not increase it because there are other reasons (like #2 and #3 above)…but it is worthy of consideration.
At GIIG we believe that wise budgeting consists of a ministry establishing an emergency fund and increasing the deductible as high as they can so that they are paying themselves to ‘self-insure’ rather than those dollars go to an insurance carrier. This is one of the foundational tenets taught by budgeting guru Dave Ramsey.