What a $1,000 deductible really costs you

A deductible is the part of a claim you pay before your insurer pays anything. It is the one lever on a policy that every Canadian understands immediately, which is why it is also the one most often pulled for the wrong reason.

The arithmetic

Moving an auto policy from a $500 deductible to $1,000 typically reduces the collision and comprehensive portion of the premium by somewhere between five and ten per cent. On a $1,900 annual premium in Calgary, that is roughly $95 to $190 a year, and the two-thirds of that saving that comes from the physical damage sections is the part you can actually count on.

So the trade is $500 of extra exposure against something in the range of $120 a year. On paper, if you go more than four years between claims, you win. Most drivers do go more than four years between claims.

The number that actually decides it

The relevant question is not the expected value. It is whether you can produce $1,000 on a Tuesday in February, the day the shop asks for it, without putting it on a credit card. If the honest answer is no, the higher deductible is not saving you money. It is converting a manageable expense into a small crisis, and buying you a hundred and twenty dollars a year to do it.

Ask yourself where the money would come from. If the answer involves a line of credit, keep the lower deductible.

Where the deductible is not what you think

• Home policies often carry a separate, higher deductible on water endorsements. A $1,000 policy deductible can sit alongside a $2,500 sewer backup deductible.
• Comprehensive claims in hail country sometimes carry a percentage deductible rather than a flat one, which on a $60,000 vehicle is a very different number.
• Glass is frequently written with its own deductible, and in some markets with none at all.
• A commercial property policy with a coinsurance clause can reduce a payment far below the deductible conversation if the limit is set too low.

The version of this that is always worth doing

Raise the deductible on the coverage you are least likely to use and least likely to be hurt by, and keep it low where a claim is both plausible and awkward. A tenant policy at $500 costs a few dollars a month more than one at $1,000. A comprehensive deductible on a fifteen-year-old vehicle you would not repair anyway can go as high as the insurer allows.

And do not raise a deductible to offset a rate increase you have not questioned. Ask what changed first. Sometimes the answer is a rating factor we can fix.