Home and auto insurance premiums are increasing like crazy. (Check out our article to know exactly what is happening in Colorado: https://www.ullrichinsurance.com/colorados-hard-insurance-market-of-2024/)

Jared made a video where he shows you how to calculate your “break even point” when considering increasing your deductibles.

Take a look here: https://www.loom.com/share/14eeb5e949ec4bc9bdcc62d7c54e083f

Here is a transcript:

0:01 Hey, this is Jared Ulrich with Ulrich Insurance Agency. This is going to be a video about deductibles. So, um, here’s our website.
0:11 We have an article called Colorado’s Hard Insurance Market of 2024. Insurance premiums are going up. And it’s getting pretty crazy.
0:22 This is happening in all 50 states, and Colorado is one of the worst states. We do a business in about 20 states, and I know that Colorado is one of the worst states for this.
0:31 But insurance companies are increasing premiums. And they’re getting picky with what they will insure. So their underwriting standards are getting very tight, and they’re cancelling people, and they’re also covering less and less.
0:45 So if you want to know exactly what’s happening in the market, and why this is happening, please read this article.
0:53 But something that we’re thinking about a lot is deductibles. I want to share with you my experience and my equation of how I can decide if it’s worth it to increase deductibles or not.
1:04 So increasing deductibles really isn’t an emotional thing, but people make it that way because they’re not used to paying high deductibles.
1:15 So they might say, I don’t pay deductibles a thousand dollar deductible. I just don’t do it. I’ve never had one that high.
1:23 I won’t do it. That’s too scary. Or same with two thousand dollar deductible. I won’t do two thousand dollar deductible even though that is high, right?
1:33 But it’s all a equation of how much you save and how. Likely there is to be a claim and how much risk you have.
1:42 So when you take risk upon yourself and you take a higher deductible, the insurance company gives you bigger discounts and they lower your premium, okay?
1:52 So imagine you have auto insurance. We have comprehensive and collision. Comprehensive is if your car is damaged by hail. Or if it’s stolen or damaged by weather, that’s a comprehensive claim.
2:04 Or if someone steals your catalytic converter like it happened to my dad when he was at the airport. He comes back and the car was in the parking lot and he thought it was safe and his catalytic converter was gone.
2:15 And then there’s so that’s comprehensive and then there’s collision is if you drive down the road and you hit something with your car, that’s a collision claim and you have to pay your collision deductible.
2:26 Or if there’s a hit and run driver that hits and runs your car, you pay your $500 collision deductible and your insurance company pays the rest.
2:35 So, in this scenario, let’s say you increase your deductibles by $500. And it goes from $500 to $1,000 and you save, let’s say $238 per year, okay.
2:50 So this is how you calculate the breakeven point. First you type in the new deductible, which is $1,000, and you save $238 subtract the old deductible, and that will tell you how much your deductible went up.
3:05 So in this situation of course it went up by $500. And then you divide the amount of money that you’re saving per year.
3:14 In this one it’s 2.1, so the breakeven point is 2.1 years. So. If you have a claim in the next 2.1 years, you’re better off taking the lower deductible and paying more.
3:29 If you don’t have a claim in the next 2.1 years, you’re better off taking the higher deductible and paying less.
3:36 But let’s say, you know, how often do you have a claim that’s not deductible. That’s a big thing to think about.
3:41 If you haven’t had a claim in the past 10 years, what if your deductible was this high for the last 10 years?
3:47 You’d have an extra $2,380 in your pocket. But let’s say in the next 10 years you have one claim. So you have an additional $2,380 in your pocket.
4:00 And then with the extra claim, you had to pay $500 extra. So you’d take $500 out of that. You still made a lot of money out of that increased deductible.
4:11 Of course, it would be a bummer if you have a claim tomorrow and you have to pay the high deductible.
4:15 That’s why it’s a good idea to remember if you do have high deductibles and maybe put some extra money into an emergency fund or a savings account and not touch that money so that you can have the money for the deductibles if you need them.
4:29 You know, in this market, it could make sense to take a $2,000 deductible really. You know, sometimes you’re saving $700 a year to go to a $2,000 deductible.
4:42 So let’s just run the numbers. So you take the new deductible minus the old deductible and that will give you the increased deductible which is $1,500 in this case.
4:56 And then you divide the amount of savings in the this case it’s 2.14 years. So is that a risk you’re willing to take so that every 2.14 years you put an additional $1,500 into your pocket?
5:13 I don’t know. It all depends on your risk profile. For me, I think that would be a good risk because I don’t get in that many claims.
5:21 I don’t have, I’ve only had one claim the past 10 years and that was when an uninsured driver hit my wife and drove away.
5:29 It hit and run. We had to pay our collision deductible. So let me know if you want to talk about deductibles or if you want to run scenarios by.
5:39 Remember, you can call my office. I’m my cell phone 24-7 if there’s emergencies. If you have a billing question, then call the office during the day.
5:48 But let us know if you have any questions.

Video: When is it worth it to increase my deductible to save on my premium?

by Jared Ullrich

Don’t forget to watch Jared’s training on this topic of how he takes the emotion out of making the decision to increase deductibles or not: https://www.loom.com/share/14eeb5e949ec4bc9bdcc62d7c54e083f

Increasing deductibles on home and auto insurance can be a smart financial strategy for those looking to save money on premiums. Deductibles are the amount you pay out of pocket before your insurance coverage kicks in. By opting for higher deductibles, you can significantly lower your monthly or annual premium costs.

Here’s why this approach might make sense:

1. Lower Premiums

Insurance companies charge lower premiums when you agree to a higher deductible because you’re assuming more financial risk. This reduction in premium payments can add up to substantial savings over time, especially if you rarely file claims.

2. Self-Insurance for Small Claims

For those with sufficient emergency savings, paying a higher deductible in the event of an accident or damage may not be a financial burden. Instead of using insurance for small claims, you can treat minor repairs as out-of-pocket expenses, reserving your insurance for major incidents. This also helps avoid the potential increase in premiums that can follow frequent small claims.

3. Long-Term Savings

Even if you do need to file a claim eventually, the money saved from years of paying lower premiums could offset the cost of a higher deductible. For many, the long-term savings are worth the occasional higher out-of-pocket expense.

4. Risk Management

Increasing deductibles encourages better risk management and careful consideration before filing a claim. This can lead to fewer claims, which may further help in maintaining lower premiums over time.

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