Should I Increase My Homeowners Insurance Deductibles

Homeowners insurance is a policy that you will likely have to carry over many years, particularly if you have a mortgage on the property. Because of your need for coverage at all times, home insurance will become an essential piece of your household budget. Therefore, you’ll probably want to do all you can to make your policy affordable. 

You might have heard that one way to save on your policy is to increase your deductibles. On one hand, this step could help you save money on your premiums. However, it is only a decision that you should make carefully. Increasing your deductible increases your responsibility for home insurance claims. Therefore, even though you might save on your rates in the short-term, you might wind up paying a lot more money on your own when a claim arises. 

What is a home insurance deductible? 

A deductible is a policyholder’s personal financial responsibility for insurance claims. In other words, it is a portion of damage costs that you agree to pay on your own before your insurer will pay. Multiple parts of your home insurance might contain deductibles, namely your dwelling and contents coverage. 

With a deductible on your plan, you agree to pay for all claim costs up to the deductible value. Costs of a claim above the deductible value will receive coverage from your deductible. 

Suppose, for example, that your home sustains $3,000 worth of covered structural damage from a severe weather event. You have a $1,000 deductible on your dwelling coverage. Therefore, you must pay the first $1,000 for your own damage and then your insurance will pay the remaining $2,000. 

The Benefits and Drawbacks of Increasing Your Deductible 

Often, deductible values are yours to choose when you buy your policy. However, you should make an informed decision about what this value will be. 

The higher your deductible, the lower your premium might be. By increasing your deductible, you shift more of a cost burden onto yourself and away for the insurer. Therefore, your risk level to the insurer will drop. As a result, they might be able to offer you a lower premium cost. 

However, if you increase your deductibles, you take on more costs for yourself. This means that you will have to pay more out of pocket for a claim if you have a higher deductible. All in all, the increased burden of the deductible will usually far outweigh the benefit of saving a few dollars per month on your premiums. Plus, any claims that fall below your deductible value will not have coverage at all. 

Rather than trying to increase your deductible to save money on your home insurance, ask your agent about other savings opportunities. They can help you compare multiple policy options to determine which ones offer you savings opportunities in better ways than just increased deductibles.