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Should I Choose a High Deductible Plan

When setting the deductible on any insurance, three things need to be considered: 1) What is the annual premium savings at various deductible amounts, 2) How likely do you think you are to have a claim, 3) What deductible amount will you easily be able to afford if you have a claim.

A higher deductible on your insurance will always mean paying less in premiums, but how much less can vary widely.  So, always have your insurance company give you specific quotes for different deductible levels so you can see if the lower premiums of a higher deductible plan are worth it.  If the annual premium difference is relatively small, then it is probably not worth the chance of higher out of pocket costs just to try and save a few dollars.

If you live in an area that is prone to various types of bad weather, a high deductible plan might not be a good idea.  After all the annual savings from a higher premium plan can quickly evaporate by having to pay $500 or $1,000 extra out of your pocket when you have a claim.  Making an honest assessment as to how likely you are to have a claim can therefore help you decide whether you are willing to assume the extra out of pocket risk that comes with a higher deductible plan.

Finally, take into consideration what deductible amount you will be able to afford.  If you are going to find it difficult to pay $2,500 out of pocket, then you might want to pay the higher annual premiums and go with a $500 deductible plan.  While the annual premiums will be higher, at least you have the peace of mind of knowing that you are covered at that lower level.

Raising your homeowner’s insurance deductible can be a great way to save on premiums, but make sure to take into consideration the three points above before selecting what is the correct deductible for you.

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