If you file a homeowners or auto insurance claim, you will usually have to pay a deductible and the insurance company will cover the remaining cost of the claim. Insurance policies with higher deductibles typically have lower monthly premiums. Raising your deductible may be a smart move in some cases, but it’s not the right choice for everyone.
How Could Raising Your Deductible Save You Money?
A policy with a higher deductible is less risky for an insurance company since the insurer pays less for claims. Therefore, the company charges lower premiums. In some cases, the savings are substantial. The amount you can save would depend on the insurance company, your coverage options, your driving record and claims history, and where you live.
Can You Afford the Deductible?
A policy with a higher deductible may shield you from catastrophic losses, but it would increase your out-of-pocket expenses if your home or vehicle got damaged. Only choose a policy with a high deductible if you could afford to pay it.
If you have a limited income and little or no savings, you could find yourself in a tight spot if you need to file an insurance claim. If you cannot cover the deductible or borrow money from family or friends, you may be unable to make vital repairs. Not fixing your car could endanger you and others or leave you unable to get to work. Neglecting home repairs could threaten your family’s health and safety and could lead to even worse damage.
An incident, such as a severe storm, could damage both your home and car at the same time. In that case, you might need to pay two deductibles. Ask yourself if you can afford that.
Can You Cover Small Repairs Yourself?
With a high-deductible insurance policy, you can only submit a claim if the amount of your loss was greater than the deductible. You would have to pay for minor repairs yourself. The costs of several small repairs can quickly add up. Think about whether you could afford these repairs.
Explore Your Options
Request quotes from several insurance companies for policies with the same coverage options and a variety of deductibles. This will allow you to make an apples-to-apples comparison and choose an insurance policy and deductible that are right for your circumstances. You may also be able to save money by bundling your home and auto insurance policies and by asking if you qualify for discounts.
Be Prepared for the Unexpected
Your home or car may be damaged at any time, so be sure you have enough money set aside to cover your insurance deductibles. If you don’t, put money in a savings account so you will be able to pay a deductible if necessary.