If you believe increasing the deductible on your homeowner’s insurance is a quick way to save extra money, you may be defeating the whole purpose of insuring your home in the first place. According to a recent CNBC report, elevating your deductible from $500 to $1,000 cuts the annual premium by seven percent. That is the finding of a new analysis by InsuranceQuotes.com. If you increase the deductible from $500 to $2,000, the average savings take a jump to 16 percent. When the deductible is set at $5,000, homeowners save 28%.
When you consider that the average insurance premium in the US is $1,096, those simple increases could reap savings in the amount or $77, $175 and $307 respectively. However, that being said, the savings also differ depending on where a homeowner lives. For example, a resident in North Carolina can reduce her homeowner’s premium by almost 40% by jacking up the deductible to $2,000. Someone in Hawaii who opts for the same cover saves only about 5%. Nevertheless, according to financial experts, making the decision to raise your deductible is definitely a risk. You don’t want to end up being insurance poor.
In fact, according to research, 50% of people in the US claim they wouldn’t be able to afford an emergency repair of only $400 without borrowing money or selling something of value. A Bankrate survey also concluded that about 66 million Americans do not have anything saved for an emergency. Experts question people who raise their deductibles, especially those who cannot even come up with $500 to cover an emergency.
According to financial specialists then, if you already don’t have much saved, it is probably smarter to save the money first and increase your deductible later. In addition, financial experts advise to review your policy for any coverage gaps of some of the more expensive or common claims. You may be able to increase your deductible and obtain more protection overall by signing up for coverage in the form of an umbrella policy or a rider for valuables.
If you wish to raise your deductible solely on your homeowner’s policy, then make sure you can actually cover the deductible should you need to use the insurance. If you don’t have enough money saved to cover a higher deductible it is better to save the money first before you raise your policy’s deductible.