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From homeowners insurance to automobile insurance, raising your insurance deductibles can help lower your premium and save you money. However, this strategy works when you lower it by the right amount. Yet, how do you know how much to lower your insurance deductibles by? Here are some advantages and disadvantages to consider when determining whether or not raising your insurance deductibles is right for you.
Typically, a higher insurance deductible often means more savings for your monthly premium. For example, raising your car insurance deductible from $500 to $1,000 can save 9 percent on monthly premiums, while raising it to $2,000 can save 15 percent, according to an InsuranceQuotes.com study. Thus, it’s important to negotiate your insurance premiums by comparing how much you’re actually saving on car insurance by increasing your deductible.
Where you live can impact how much of a savings you can take advantage of, too. An InsuranceQuotes.com survey revealed that raising your homeowner’s insurance premium can mean saving 1.81 percent if you reside in Delaware compared to saving 8.01 in Pennsylvania.
The disadvantage of raising your insurance deductibles is that it requires a large amount of money on hand, should an issue occur. For example, if you raised your automobile insurance deductible to $1,000, that cash must be available in the event you must make a claim. If you’re struggling to come up with that amount, it may not be in your best interest have a high deductible. Instead, opt for raising your deductible by an amount that you can realistically pay if you have to make a claim.
While raising your insurance deductibles can help lower your costs, making claims can have the opposite effect even if they are minor claims. That’s because the more insurance claims you make can impact your insurance premium over time. You may already be paying a higher premium thanks to the amount of claims you make. For example, making multiple minor auto insurance claims in the state of New Jersey may come with an added surcharge that can increase your insurance premium by 32 percent to as much as 350 percent, depending on the amount of claims and claim amount. So, if you have made several minor insurance claims, it may be in your best interest not to raise your insurance deductible.
Whether you’re considering raising your automobile insurance or health insurance, making the decision that’s right for you involves taking key aspects into consideration. By considering the benefits and pitfalls that come with raising your insurance deductibles, you can avoid making a mistake and decide if raising your insurance deductible is right for you.