With all this inflation, it seems like everything costs more these days. Recently, I had a couple of clients reach out to discuss their insurance. They were trying to find a way to save some money on their policies. One of the questions, they asked, was: If they increased their deductible, how much would that decrease the annual premium for their home insurance? While this varies from company to company, here is a rough idea of how much it might save you. For example, if your home insurance cost is $3000/year with a $2500 deductible, if you increase your deductible to $5000, it might save you about $400/year (rough numbers). And if you increase your deductible to $10,000, it might save you another $400/year on top of that.
I feel it is important to look at a couple factors when deciding on your deductible. They are: What are the potential problems you may face from an aging home; and, what are you comfortable paying out of pocket. Let’s break down these items a bit more. Have you re-piped your home or are you afraid of water damage (sudden and accidental pipe breaking)? In Orange County, water is our number one cause of claims. If you have re-piped your whole home, maybe a higher deductible might work for you. You also have to be comfortable with a larger out-of-pocket expense. While it would be nice to save $400 or $800/year on your insurance, are you able to self-insure for the smaller items that could arise?
For auto insurance, it is always good to look at your comprehensive and collision deductibles, along with your rental car coverage (coverage in the event you are at-fault and need to rent a car while yours is being repaired), towing and glass coverage. Typically, if you increase your collision deductible from $500 to $1000, you will save about $80-$90/year. Which means, you would have to go 6 years without an accident to be truly saving money. In my opinion, towing, rental car coverage and glass (low or no deductible if you need to replace a windshield) are all important and I would not reduce or remove them.
As inflation is chipping away at what we have in our wallets, it is a good idea to look a little closer at your insurance to see if it will make sense to adjust your deductibles. Please let us know if we can help analyze your policies to look for opportunities for you to save in the long run.
