What's a good deductible for my insurance?
If you've ever had insurance before, chances are you've heard the term 'deductible'.
Let's just go ahead and define it:
It's the amount of money a policyholder is responsible for in the event they make a claim on their policy.
WHY IS THIS IMPORTANT?
Well one reason is that DEDUCTIBLES are typically DIRECTLY RELATED TO THE COST OF THE INSURANCE POLICY.
The MORE money a person is willing to pay for a deductible, the LESS money an insurer usually charges for the policy.
Another IMPORTANT reason to care about your deductible is that you should MAKE SURE YOU CAN AFFORD TO PAY IT IF YOU NEED IT.
*So don't get carried away with $5,000 deductibles on your 2006 Honda Civic.
2 Deductibles - 1 Policy
There's nothing new about the idea of multiple deductibles in one policy.
Consider Auto Insurance being split into collision and comprehensive deductibles.
What's WORTH KNOWING NOW - Is how this has made it's way into both HOME INSURANCE and COMMERCIAL PROPERTY INSURANCE.
Many insurers will give you a $500 or $1,000 deductible on the house....but then require a $2,000 deductible for any WATER damages.
In some cases they may remove or limit coverage on certain types of damage altogether. Ex. Vandalism by tenants.
By PUSHING UP DEDUCTIBLES insurers hope to:
1) decrease the number of small claims being made.
2) ease the pressure of yearly premium increases.
3) make policyholders care more about AVOIDING losses altogether.
Don't apply a one size fits all approach here.
Some carriers offer GREAT price breaks for certain deductibles, and way less of a break on the next level up.
EXAMPLE: Home Policy costs $1000 a year with a $500 deductible.
That carrier may offer you $850 a year for a $1000 deductible.
(that's a solid price break if you're wondering)
Then $800 a year for a $2,500 deductible.
The last option is not as attractive in my opinion, but someone trying to minimize their yearly premium may feel differently. What is reasonable for one family to payout in the event of a loss may not be for another.
1) Understand what a policy requires of you if you need to make a claim.
2) Be comfortable paying the amount of a deductible if you need to.
3) Minimize the cost of coverage by figuring out what risk you're willing to carry.
CLAIM SCENARIO - Deductibles in action
FUN FACT: Did you know a deductible applies to the LOSS and not to a policy limit?
Example: Jewelry has a $5000 maximum payout on a policy and a $1000 policy deductible.
Policyholder 1 loses their $6,000 engagement ring while taking a ride on the Halifax Harbour Hopper. Lucikly they listened to a broker who helped them purchase a policy that included 'mysterious disappearance'.
Most consumers would probably do the math like this:
Maximum jewelry limit is $5,000.
LESS the $1,000 deductible = $4,000.
.....but that'd be incorrect.
The ACTUAL calculation takes a DEDUCTIBLE from the LOSS and THEN applies any policy limits.
- Deductible (1000)
In this case, policyholder 1 would get a $5,000 payout.
If the above has you feeling overwhelmed, talk with a broker.
Outsource some expertise.
EXCITING NEWS FOR CONTRAST INSURANCE
In late September Matt Davison of Contrast Insurance accepted a seat on the Board of Directors for the Insurance Brokers Association of Nova Scotia.
The Broker Association of NS (often referred to as "IBANS" for efficiency) is celebrating it's 70th Anniversary this year and we're honored and excited to help the association meet and exceeds its goals.
What is IBANS?
'IBANS' is the Broker Association specifically for NOVA SCOTIA.
There's also 'IBANB' (NEW BRUNSWICK) 'IBAN' (NEWFOUNDLAND) 'IBAO' (ONTARIO) and the list goes on. Each province has specific issues and legislation to deal with, so they have their own regional associations all of which roll up under the NATIONAL BROKER ASSOCIATION 'IBAC' - The Broker Association of CANADA.
While you may not be too familiar with IBAC it's likely you've seen their TRADEMARK BIPPER LOGO around. Last year he underwent a very Barry Bonds like transformation. Don't believe me? You be the judge.
Here's a BEFORE and AFTER:
Setting the jokes and baseball aside IBAC is doing a great job laying out the benefits of buying coverage through a broker and promoting the #BrokerAdvantage.
Here's one of their ad spots from their recent 'BEFORE THE QUOTE' campaign:
We're really excited and proud to be a part of the IBANS team, and look forward to helping in any way we can.
Thanks for reading.
It occurred to me recently that I’ll never REALLY be satisfied with paying for insurance.
Home. Auto. Life. Travel....whatever.
I could think of hundreds of things I'd rather spend $3,000 a year on.
1. Buy used Seadoos every year to ride and abandon.
2. Buy new grass each year and never take care of it knowing more is coming next year.
3. Purchase and crash those trendy drones I see around.
4. Unlimited Ice Cream and Milkshake Budget.
5. Donate it. (had to offer up SOMETHING that wasn't totally self indulgent)
This could go on, but I think you see where I'm going here.
Insurance is a lot like PROPERTY TAX or AN OIL BILL. I don't WANT to pay it, but it's a requirement if you have a vehicle, or home.
So with this in mind, I submit to you a suggestion for improving your feelings about these payments.
Make sure the money you spend is MAXIMIZING your personal enjoyment of this otherwise disappointing expense.
It seems that a LOT of people derive the VALUE from knowing they paid the absolute bottom dollar for insurance coverage.
They shop for new carriers every year, they don’t mind waiting on hold forever, and they have zero interest in getting to know the people offering that product.
THE VALUE FOR THEM is about feeling like they got the VERY LOWEST PRICE AVAILABLE.
In today's world.... I TOTALLY get that approach. It keeps the most dollars in your pocket TODAY, and you're rolling the dice on never needing to use it.
If you're this type of customer....you should shop with a direct insurer.
There are lots of them out there catering exactly to what you're looking for. (TD, UNIFUND aka JOHNSON, Sonnet, etc)
The model is setup so that the insurers save costs on selling it (using call centers) and then pass some of those savings to the customer through lower premiums.
ALL UPSIDE right? Not necessarily.
There's a TRADE OFF you may not know about.
When you buy direct from an insurer, you're opting to represent yourself in all dealings with that provider.
A broker's job is to advocate for their client in a claim. So by removing the broker from the equation you're forfeiting that extra layer of protection/advice you could be getting.
No different than buying a home without a realtor. Super idea until you find out the house is built on a swamp. Since you're actually risking more to buy direct it makes sense the price should be lower.
If you have a claim that goes sideways or you forget to update them about important changes during your policy, it's an uphill battle for those who aren't familiar...and hopefully you've banked some of that money you've saved on premiums to hire a lawyer.
You forfeit the right to complain if you declined a coverage to save money, or don't feel well represented in a claim situation.
You shouldn't troll the TD social media accounts about how BAD THEY ARE AFTER A CLAIM IS DENIED. *Although I should admit I enjoy reading those.
If you bought the off-brand Z-PAD on E-Bay....it's unlikely you're going to receive Apple product quality.
If lowest price was the only thing people VALUED the market would be FLOODED with Kirkland Basketball Shoes and Big 8 Jeans...yet I can't find Big 8 Jeans anywhere.
VALUE can be lots of things...