Your insurance deductible determines how much money the insurance company expects you to contribute to auto and home repairs if you’re involved in an accident or a covered event occurs.
If you’re interested in reducing your insurance premiums, increasing your deductible can be a way to accomplish that goal. However, increasing the deductible also means you will pay more out of pocket in the event of a claim. Consider these best practices when choosing your insurance deductibles to reduce your risks of getting in over your head when accidents and other events occur.
What Can You Afford?
The purpose of insurance is to help you and your family, avoid financial disaster when accidents, thefts, and other covered events occur, so it’s important to have the right coverage in place. For some, that means stretching budgets to afford insurance premiums.
In this case, a higher deductible may shave enough off your premium to provide some breathing room. However, accidents can happen at any time, so it’s important to put away a portion of the money you’re saving toward the cost of your deductible. If you experience a claim, you’ll need that little nest egg to cover your share of the expenses. It’s good advice no matter how high or low your deductible.
Is It Worth It to Pay a Higher Deductible?
Paying a higher deductible can net you a savings on your premium, but it’s important to crunch the numbers when making the decision to go that route. If the monthly savings do not quickly add up to surpass the increase in your deductible, it might not be the best financial option for you.
A customer in Texas found the difference in her premiums to be negligible when increasing her deductible. To her, the hundred dollars she’d save off her yearly premium wasn’t worth it when the higher deductible would double the money she’d have to pay out of pocket in the event of a claim.
“It would take me ten years to recoup the savings from going with a higher deductible,” she said. “On the other hand, just one claim this year would cost me $1,000 out of pocket.”
It’s an important factor to take into account, especially in geographical regions like Texas where severe storms and hail damage are common.
Other Ways to Save on Your Premiums
If saving money is your primary objective for raising your deductible, don’t forget that there are other things you can do to reduce your insurance premiums, like updating your home security, raising your credit score, bundling policies, and shopping around for the best combination of price and coverage.
Raising and lowering your deductible can have an impact on your monthly premiums. Just make sure you make informed decisions with the big picture in mind when going that route with your policy.
If you need help on choosing the right deductible for your home, auto or other insurance, reach out to us here at BOLT Insurance Agency at 1-800-216-4171. We’d love to help.