Maine insurance deductible calculator

What the trade actually is

A deductible is the part of a covered loss you pay before the insurer pays anything. Raise it and the insurer is exposed to less, so the premium falls. That is the whole mechanism, and the question it poses is narrow: is the certain annual saving worth the uncertain extra cost when you claim?

The tool answers it in three ways at once, because one number would hide something.

The last row is not arithmetic. It is the constraint that decides the question for a large number of households, and the calculator prints it deliberately alongside the numbers that look like they settle the matter.

The worked example, at the default figures

The calculator opens on two real-shaped quotes for the same cover: a $500 deductible at $1,850 a year, and a $1,500 deductible at $1,480 a year, with one claim expected over ten years.

• Premium saved: $1,850 less $1,480 is $370 a year.
• Extra risk taken: $1,500 less $500 is $1,000 per claim.
• Break-even: $1,000 divided by $370 is one claim every 2.7 years.
• Over ten years with one claim: $3,700 saved less $1,000 paid, so the higher deductible wins by $2,700.
• Cash you must be able to find on the day: $1,500.

Read the break-even carefully. It says that if you claim more often than once every 2.7 years, the lower deductible is the better buy. Most households do not claim anything like that often. This is why the arithmetic favours the higher deductible for most people most of the time, and why almost every article on the subject stops there. It should not.

A second example: four claims in ten years

Change the claims field from 1 to 4, leaving the quotes alone.

Ten years of savings is still $3,700. Four claims at $1,000 of extra deductible each is $4,000. The tool flips its headline and reports that the lower deductible wins by $300.

The exact tipping point sits at 3.7 claims in ten years, which is the same fact the break-even line already stated as one claim every 2.7 years. Two claims leaves the higher deductible ahead by $1,700, three by $700, four behind by $300.

There is also a case where there is nothing to weigh. Set the higher deductible premium equal to the lower one, at $1,850, and the tool reports that the higher deductible saves nothing and tells you to check that the two quotes are for identical cover. That is not a trick input. Quotes that differ in dwelling limit, in endorsements, or in whether wind and hail are included at all get compared as though they were the same policy more often than anyone would like.

Why is the break-even a frequency and not a date?

Because a claim is an event with a probability, not an appointment.

If the tool said the higher deductible pays off in 2.7 years, it would be telling you something false: that you can wait it out. What it actually knows is the ratio between a fixed annual saving and a fixed cost per event, and the only honest way to express that ratio is as a rate of events.

The distinction matters when the events cluster. Claims are not evenly spaced. A hailstorm that damages the roof and two cars is one weather system and, depending on the policies, possibly three deductibles. A household that has budgeted for one claim every few years can meet two in one spring and discover the ten-year average was never the number to plan around.

So the frequency is a decision rule, not a forecast. Claim less often than the break-even and the higher deductible was right on average. Average is not the same as affordable in the year the claims arrive.

The number the arithmetic cannot see

The deductible is money you must have on the day, before the insurer pays anything at all.

A household with $1,500 in reserve and a $1,500 deductible has, in effect, chosen to put a claim on a credit card. The $370 a year the higher deductible saves is real, and it is smaller than the interest on a $1,500 balance carried for a year on a typical card rate. The trade that looked clearly favourable stops being favourable the moment it is financed.

That is why the practical order of operations runs the other way round from how these decisions are usually made. Decide what you can hand over on the day without borrowing. Choose the deductible that fits that number. Then use the tool to see what the choice is costing or saving, rather than letting the saving choose the deductible. Our banking section covers where an emergency fund should sit so that it is actually reachable in a week when you need it.

The corollary is that the higher deductible gets better as the reserve grows. A household with six months of expenses in a savings account is in a genuinely different position from one with $1,500, and should probably be looking at the next deductible up rather than the one on this quote.

Percentage deductibles on wind, hail and hurricane

Some policies do not apply a flat deductible to every loss. Wind, hail and hurricane damage are commonly subject to a separate percentage deductible, calculated on the dwelling limit rather than on the size of the loss.

The arithmetic is worth doing once. On a policy with a $400,000 dwelling limit, a 2% wind deductible is $8,000, against the $1,500 flat deductible this calculator is comparing. The two figures are not close, and the percentage one applies precisely in the storm that damages a whole neighbourhood at once.

This tool models flat deductibles only. If your declarations page shows a percentage for named storms, wind or hail, the number to plan a reserve around is the percentage one, and the flat deductible only tells you what a kitchen fire or a burst pipe would cost you. Which peril triggers which deductible is set out on the declarations page and nowhere else, and it varies by state and by carrier. The state pages note where separate storm deductibles are widespread.

Common mistakes when choosing a deductible

• Choosing the saving you cannot cover. The most expensive version of this trade is the one financed at credit card rates. Size the deductible to the reserve, not the other way round.
• Comparing quotes that are not the same cover. Two premiums are only comparable when dwelling limit, contents, loss of use, endorsements and the wind and hail treatment all match. If the cheaper quote drops replacement cost for contents, the saving is not a saving.
• Forgetting the percentage deductible. A flat figure on the quote does not mean a flat figure on every peril.
• Claiming small losses because you can. A claim slightly above the deductible can raise the premium at renewal for years, and this calculator does not model that at all. A $2,000 loss against a $1,500 deductible recovers $500 and may cost more than that over three renewals.
• Assuming the deductible applies once per year. It applies per claim, and two claims in one year means two deductibles.
• Treating the ten-year figure as a plan. It is an average over a decade, and the decade will not arrive in equal instalments.

What should you check on the two quotes?

• Confirm the dwelling and contents limits are identical on both quotes
• Check the wind, hail and hurricane deductible on each, flat or percentage
• Confirm whether contents are covered at replacement cost or actual cash value
• Ask how a claim at each deductible would affect the renewal premium
• Check that your emergency fund covers the higher deductible in full, today
• Ask whether the insurer offers a deductible between the two you are being shown
• Check the effective date of each quote, since premiums are re-priced annually

If the answer to the fifth item is no, the deductible question is already settled and the tool is only telling you what it will cost to be right about that.

What this calculator does not model

• The premium effect of claiming. Filing a claim can raise your renewal premium, sometimes for several years, and that cost falls on the lower deductible more heavily because it makes small claims worth filing.
• Any probability of loss. You supply the claim count. The tool has no view on how likely you are to claim and will not pretend to one.
• Percentage deductibles. Flat amounts only, as above.
• Multiple policies at once. Home, auto and umbrella deductibles interact in a single event, and this compares one pair at a time.
• The time value of the saving. $370 a year invested rather than spent is worth more than $370 a year, which tilts the answer slightly further towards the higher deductible than the tool shows.
• Anything an underwriter would price. Claims history, roof age, construction type and location all move real quotes, and none are inputs here.

The premium side of this page is your own quote, not an average, and that is on purpose: published average premiums vary so widely by state and by structure that substituting one for your quote would produce a confident answer to a question you did not ask. See our methodology for the general policy on that.

This page explains the arithmetic of a deductible. It is not an insurance recommendation and not personalised advice. See the disclaimer.