It is one of the most common questions home insurance agents receive. These tips should help clarify things and make it easier to choose the right one for you. So, how much of a deductible should you carry?
When choosing a how big of a home insurance deductible to carry consider three things.
1. How much can you comfortably afford, financially, out of cash reserves?
2. How much can you emotionally afford? (If it makes you nervous when it storms, it’s too high!)
3. How much are you saving for taking the extra risk?
For Example: A recent quote comparison for a $300,000 home showed it would be $156.00 a year less for the $1000 deductible. If you take the $156.00 savings and multiply it by eight years – which is the average in this area for home insurance claims – the savings would be $1248.00. If you need to file a claim $1248 – $500 = $748. You would still be ahead.
Carrying a higher deductible also discourages making too many smaller claims which can impact rates by loosing claims free discounts and making it difficult to switch carriers. However, once you go past a $1000 deductible, the point of diminishing return starts to apply and the savings is usually not worth the risk. You want to manage your risk wisely.
Carrying a higher deductible is a wise way to cut your insurance costs. It seems everyone is looking to save some money these days. Insurance companies know this too. It is why their marketing is so focused on saving money. You need to be careful. These companies know people will shop on price alone. In an effort to provide the lowest cost some will offer policies with coverage reduced and sneak in things like 2% wind hail deductibles. On a $300,000 home that is a $6,000 deductible!
Be careful fifteen minutes could save you fifteen percent and cost you a fortune if you suffer a loss.
Get quotes for each deductible and do the math. If you can recoup the savings in eight years or less choose the higher deductible. Raising your deductible is a good way to save.
Tim Peddycoart is an independent agent for The Insurance Specialists Team in Elk River, MN. http://www.Mn-Home-Insurance.com He helps people lower their insurance costs, get better coverage, and shows them how to receive hassle free low cost insurance for life.
