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How Do I Know Which Deductible to Choose?

Wednesday, October 5th, 2016

Two hands holding a white paper fortune tellerYou choose a deductible—which is the amount of money you pay before insurance kicks in—for both your auto and your home policies. Your deductible can be as little as $0 and as high as $10,000 (with lots of options in between).

If you choose a lower deductible, you can generally expect to pay more in premium. Some people prefer to keep a high deductible and pay less in premium, while others prefer lower deductibles and higher premiums.  It often comes down to your personal preferences and financial situation.

A better way to choose your deductible

Good news: you have an insurance agent who can help you select a deductible that best fits your needs. Here are a few tips to keep in mind when you talk with us about deductibles.

  • Make sure you have enough money to cover your deductible. Whether your deductible is $50 or several thousand dollars, it’s important to have enough cash on hand to cover it. You’ll want to have enough money to cover the combined cost of your home and your auto deductibles. That’s because if something like a fire damaged or destroyed your home and your car, you may need enough cash to pay both deductibles.
  • Check with any lenders to see if you must meet a minimum deductible. If you have a car loan or a mortgage, your lender may say that your deductible can’t go above a set dollar amount.
  • Think about what you’d be willing to pay out of pocket. When you file a claim, it’s possible that it may cause your premium to increase. For this reason, some people opt to pay lower-dollar claims out of pocket. Think about if—and how much—you’d be willing to pay to avoid a possible rate increase, then use that information to help choose your deductible.
  • Consider different deductibles for different risks. More good news: some carriers give you the option of choosing different homeowners deductibles for wind or hail, fire or lightning, theft or vandalism, water, and named storm.  This option is known as by-peril deductibles, and it gives you more control over your deductible. For instance, if you feel the risk of water damage in your area is low, you may opt for a higher water deductible that will let you save on your premium. On the flip side, if you live in an area at risk for hurricanes, you may choose a lower deductible for named storm.
  • Check in with us every year. Your deductible is not set in stone, and you can raise or lower it as your life changes. Your insurance agent can give you solid advice and make the change for you.