Home owner's insurance deductible

[corn18]

I was looking at my homeowner's policy today and saw that I was carrying a $1,000 deductible on $616,000 of insurance. So I upped the deductible to $6000 (1%) and saved $600 / year. I am comfortable with that as I can afford any $6,000 issue that comes up.

What are your thoughts?

Tom

[97guns]

i go for higher deductibles myself, i rarely put in a claim. with the monthly savings you will make up the 5K difference in deductibles in 8-9 months

[MonkeyMama]

I do the same. Most our insurance is for catastrophic purposes so we don't need $1,000 deductibles for catastrophic type claims. Of course we have plenty of cash to meet our deductibles.

We also take the higher deductibles on our health insurance and auto insurance and disability insurance, and so on. (It's not technically a "deductible" on the the disability insurance, but saying you don't need it the first 6-12 months saves a small fortune in premiums).

I'd consider the risk and individual situation. I have some friends who are constantly in auto accidents and who should probably keep a low auto deductible.

[HappySaver]

Depends on how much you're willing to pay if something major goes wrong.

I know someone who had just raised his deductible significantly when a water pipe burst, pretty much destroyed the interior of the entire house, and had to gut/reconstruct it completely.

He had to pay the huge deductible out-of-pocket, of course.

I agree that $1000 is low. We're at $2500. I would not be comfortable with $6000.

[kork13]

i go for higher deductibles myself, i rarely put in a claim. with the monthly savings you will make up the 5K difference in deductibles in 8-9 months

...and by "8-9 months" he actually meant "8-9 years"

This is the math I'd recommend you go through...
[$$ Increase in deductible] / [annual premium savings] = payback period, in years (assuming no claims), where you are now better off.

So for your present case, $5000/$600=8.333 years.

Perhaps play with it a bit. If you only raise your deductible to $3k, perhaps you would save $300/yr in premiums. $2000/$300=6.667 years. (better deal than your current change to $6k) If upping it to $2k only saved you $100/yr, .... $1000/$100=10 year payback (worse deal).

So I'd speak with the company, get quotes for a few different deductibles, and calculate which one is the most beneficial for you.

[KevinNJ25]

Very good way to save money in the long term. As a mid-level manager in the Claims department for a large carrier I can also provide some more helpful information for savings.

1. EVERYONE should take Sewer Back-Up and Sump Pump Overflow Coverage’s. Most carriers limit the amount of payment for mitigation and repairs to the home from a sewer back up or sump pump overflow to 10,000 with a deductible of $1,000. This endorsement is VERY inexpensive for EVERY carrier and I cannot tell you how many follow up phone calls I needed to make to policyholders to explain that the City sewer line that backed up and destroyed the brand new finished basement was not covered.

2. EVERYONE (only applicable in certain states, you would need to speak to your broker to see if you qualify) should carry a WIND/HAIL deductible. This endorsement to your policy increases deductibles for wind and hail claims which tend to have larger exposure claim with much higher settlements. Insurers usually provide networked contractors who would so the work for an agreed upon price that will cause less headache.

3. EVERYONE should notify their agent if they have an ACTIVE alarm system. Be prepared to fax a copy of a recent bill for the provider of the alarm service. I've seen premiums take a 27% DECREASE from having this discount. Also, having an active and SET alarm can also be grounds to waive a deductible if a theft occurs to the home.

4. Almost every carrier offers discounts for certain affinity markets. For example, I graduated from St. John's University. GEICO offers all alum 15% discounts for polices from being an alum. Other discounts I could use are: Costco member, AAA member, Volunteer FD member, etc etc. Call to inquire about your memberships and which would qualify for the largest discount.

5. HOME COMPUTER COVERAGE. For a SMALL increase in premium almost every large carrier is now offering coverage’s (all risks associated) for damage to any data processing units. Smart phones, laptops, desktops, PDA, iPads/Pods etc. This coverage carries a DRASTICALLY lower deductible (usually $50).

I'd be glad to answer any additional questions one may have RE savings on HOME policies.

Have a GREAT day!