Many people are looking to save money these days. If you’re a homeowner, you may assume an effective way to do this is to lower your deductible if you prefer to also lower your monthly home insurance premium payments. In most cases, though, lower deductibles generally equal higher premiums. Below, we go over the basics of home insurance deductibles and what to consider with the premiums related to your policy.
Home Insurance Deductibles—The Basics
With a standard home insurance policy, you’ll need to pay the deductible before the insurance company picks up the rest of the costs. Some other types of home insurance, such as a policy associated with liability coverage, typically don’t have deductibles. With a standard policy, there are three possible options:
• Percentage deductible – In this instance, you’re paying a certain percentage of the total costs for home-related damages and repairs before your insurance policy takes effect.
• Specific dollar amount deductible – This is when there’s a specific amount you must pay first before the rest of the expenses are covered.
• Split deductible – In this case, there’s a mix of a set dollar amount for certain types of home damage and a percentage amount for other types of damage.
If your primary goal is to reduce your monthly home insurance payments, you’ll need to consider a higher deductible. According to Insurance.com, the average deductible for a home insurance policy today is $500. By raising this amount, you’ll be able to reduce your premium payments. This may seem like a naturally appealing option, but there are some other factors to consider first, one of which is your financial situation. If you’re comfortable financially, it’s easier to absorb more initial costs before your policy kicks in. Other situations when a higher deductible is worth considering to lower monthly payments include:
• You have other financial resources if unexpected home damage occurs
• You’ll likely qualify for a loan to make home repairs if necessary
• You’re struggling financially and lower premiums are more important to you
With a lower deductible, your monthly payments are likely going to be higher. However, this can be beneficial if unexpected home damage could be financially devastating for you. Other situations when higher premiums but lower deductibles can make sense include:
• You have an older home
• You live in an area susceptible to flooding and similar damage
• You have a home likely to be fairly expensive to repair
Other Ways to Keep Premiums Reasonable
You don’t necessarily have to increase your deductible to a point that’s going to be financially risky for you when it’s time to file a claim just to reduce your premiums. Fortunately, there are some other things you can do that typically contribute to home insurance savings, including:
• Being proactive about home-related maintenance
• Seeing if there are bundling options available
• Updating your home when it’s possible to do so
For more information on deductibles, premiums, and choosing homeowners insurance that suits your needs, call on the experienced agents at Altra Insurance Services. In addition to homeowners coverage, we offer a variety of reliable insurance products, including business, renters, and auto insurance. San Diego Residents are encouraged to call us today at (619) 404-6311 to learn more about our high-quality service and affordable coverage.