Should You Raise Your Homeowner's Insurance Deductible?

If you own a house, you need homeowner’s insurance. You may be able to lower your premiums significantly and save money each month by raising your deductible. But before you do so, weigh the pros and cons.

Benefits of a Higher Deductible
A policy with a higher deductible usually has lower premiums than a similar policy with a lower deductible. The policyholder assumes more responsibility for paying for repairs and replacing damaged property in exchange for lower premiums. This reduces the insurance company’s risk, since policyholders file fewer claims, and the insurer pays out less for approved claims. If you chose a higher deductible and didn’t file any claims for several years, you might qualify for discounts that could reduce your premiums even further.

Could You Afford a Higher Deductible?
If you switched to a higher deductible and went several years without submitting a claim, the amount you saved in premiums could be enough to cover the deductible if you eventually needed to file a claim. Before you decide to raise your deductible, make sure you have that amount of money set aside or could save it in a reasonable period of time. If you didn’t have enough money to cover a deductible and your house suffered major damage, you could be forced to continue living there without having problems fixed, which means they could get even worse.

If you experienced a significant loss, having to pay a large deductible could be a tough pill to swallow. Knowing that your insurer would foot most of the bill could be comforting. Insurance companies typically offer policies with a range of deductibles. It might make sense to raise your deductible, but not to the highest amount the company would allow.

How Much Money Could You Save by Raising Your Deductible?
Where you live could have a significant effect on how much your premiums would go down with a higher deductible. In some places, you could save a bundle, while in other locations your potential savings might not make it worthwhile to raise your deductible.

Most insurance policies have a single deductible amount that applies to all claims, but some have different deductibles for liability, wind and hail. Make sure you know what the deductible is for different perils.

Would It Make Sense to Raise Your Deductible?
Raising your homeowner’s insurance deductible could save you money each month, but it could leave you in a bind if your house needed repairs or if your belongings were damaged or stolen and you didn’t have enough money to pay the deductible. Contact your insurance company or agent to discuss your options and your overall financial situation so you can choose a deductible and premium that are comfortable for you.