Weddnesday, March 19, 2014
Raising deductibles on your home or auto policies can save you money. We all want that, don’t we? However, before you do, consider the following information to see if it’s a good decision for you:
You haven’t had any claims in 20 years
If you have not had any claims for many years, then your risk level is low and raising your deductibles could be a good idea. However, you have to keep in mind how much of a savings it is to you. For example: your agent tells you if you increase your $500 deductible to a $1000 deductible, you will save $200 on your policy per year. In 2 ½ years, you make up the cost of the higher deductible in the savings you get for having a higher deductible. That is a good return. However, if it only saves you $30 per year, then it would take over 15 years to make up the cost of the higher deductible and that would not be a good return.
Some companies actually charge you a premium for having a lower deductible
It used to be that if you had a $250 deductible then you would be charged a premium for that. If you went to a $500 deductible then there would be no charge. If you went higher, then you would get a discount. However, the insurance industry has changed a great deal and the deductible thresholds can vary with each company. So, if you have a lower deductible, then it would be a good idea to ask your agent to check on whether you are paying a premium for it. If you are not, you may not want to increase it unless the savings is substantial.
Make sure your deductible is in line with your available cash
If you have a claim and suddenly have to come up with a $1000 deductible, but you only have $500 in the bank, then you have a bit of a dilemma, don’t you? The savings you receive by having a higher deductible is great, but if you don’t put that money aside for if, or when you have a claim, it may cause unwanted hardship for you.
So, hopefully this information is helpful to you. Be sure to contact your agent and discuss the option of increasing deductibles. They will be able to determine which deductible best fits your circumstances and offers the greatest savings.