My $600 DeWalt combo kit was stolen, and I was furious. I paid my insurance premium every month, so I filed a claim. The adjuster processed it: $600 value minus a $500 deductible—here’s your check for $100. I cashed it. Six months later, my premium went up by $200 a year. I effectively paid $200 to get $100.
Key Takeaways
- The Math Doesn’t Work: For small tools, the deductible eats the payout. Filing a claim for anything under $1,000 is usually a financial mistake.
- Ghost Claims: Even a “small” payout goes on your permanent record (see previous article). You burned your “one free claim” card for $100.
- Agreed Value Deductibles: Some high-end policies have lower deductibles for “Scheduled” items (e.g., $0 deductible) but maintain high deductibles for “Blanket” items.
- Self-Insure the Small Stuff: Use your business savings for hand tools. Use insurance for the catastrophic theft of the whole truck.
The “Why” (The Trap): The Deductible as a Barrier
The deductible isn’t just a cost-share; it’s a barrier designed to keep you from bothering the insurance company.
The Trap: Many contractors carry a $250 or $500 deductible thinking it’s better. But lower deductibles mean higher premiums.
- $250 Deductible Premium: $600/year.
- $1,000 Deductible Premium: $350/year.
By choosing the low deductible, you overpay every year and tempt yourself to file bad claims.
The Investigation: “I Called Them”
I compared deductible tiers for a $20,000 tool policy.
1. Low Deductible ($250)
- Premium: $580/year.
- Scenario: Stolen $800 saw. Payout $550.
- Outcome: Rate hiked next year.
2. High Deductible ($1,000)
- Premium: $320/year.
- Savings: Saved $260/year upfront.
- Scenario: Stolen $800 saw. No claim filed (below deductible).
- Outcome: Record stays clean. Savings pay for the saw in 3 years.
3. Disappearing Deductible (Specialty)
- Offer: Some carriers (like Progressive Commercial) offer a deductible that drops by 25% for every claim-free year.
- Verdict: Great if you are disciplined.
Comparison Table: Deductible Strategy
| Tool Value Stolen | $500 Deductible Result | $1,000 Deductible Result | Recommendation |
| $600 Drill | Get $100 (Bad idea) | Get $0 | Don’t File |
| $2,500 Laser | Get $2,000 | Get $1,500 | File Claim |
| $15,000 Trailer | Get $14,500 | Get $14,000 | File Claim |
Step-by-Step Action Plan
- Raise Your Deductible: Call your agent today. Raise your Inland Marine deductible to $1,000. Take the premium savings and put it in a savings account.
- Set a “No-File” Threshold: Make a rule: “I will not call insurance unless the loss exceeds $2,500.”
- Check “Per Item” Deductibles: Some policies apply the deductible per item (rare but terrible). Ensure your deductible is per occurrence (one deductible for the whole theft).
- Use Warranties for Breaks: Use the manufacturer’s warranty for broken tools, not insurance.
FAQ
Q: Can I waive the deductible if I catch the thief?
A: Usually no. The deductible applies regardless of fault. If the police recover the goods and restitution is paid by the thief, you might get reimbursed later.
Q: Does the deductible apply to debris removal?
A: Usually, the deductible comes off the total loss first.