Selecting your insurance deductible can seem a bit stressful, but it doesn’t have to be! Simply put, your deductible is the portion of an insurance claim you agree to pay on your own before your insurance kicks in and picks up their portion.
Many drivers and homeowners opt for high deductibles to save money on their insurance premiums, however, it’s important to take a few things into consideration before selecting a high deductible:
1.Is your rainy day fund healthy?
If you have funds set aside for a rainy day that you could put towards the cost of an unforeseen event, then a high deductible might make sense for you. On the other hand, if having to spend $1,000 at once would put you in a financially stressful situation, it’s probably best to choose a lower deductible. It isn’t worth losing sleep over.
2.How much is the item you’re insuring worth?
Generally, the higher the value of something, the higher the cost to insure it. The reason being that it will cost more money to repair/replace your damaged property with property of similar quality. A high deductible on a high valued item such as your home or a new vehicle makes sense because the savings can be significant.
For instance, if you drive a 10-year-old vehicle and still carry comprehensive coverage, you probably wouldn’t want to carry a $1,000 deductible because the value of the vehicle is probably within a couple thousand of the deductible.
3.What are the chances you’ll have a claim?
Some believe that accidents and unforeseen events are simply a luck of the draw, but believe it or not, there are plenty of factors you can consider when it comes to the likelihood of experiencing a claim.
- Is your roof getting old and/or worn?
- Do you own a pool?
- Are you completing any remodeling projects?
- Does your home use a wood-burning stove?
- Do you have any young children?
For Car Owners:
- Do you regularly drive through rush hour and/or heavy traffic?
- Do you live in an area where you must drive through inclement weather frequently?
- Do you have a teenager or new driver on your policy?
- Do you live in an area with high crime rates?
- Is your car reliable to get you to and from your destination?