The savings are real.
The Insurance Information Institute estimates that raising a car’s collision and comprehensive deductible from $200 to $500 can cut the cost of that coverage by 15% to 30%. Going from $200 to $1,000 can cut that cost by 40% or more. On a homeowners policy, raising the deductible from $500 to $1,000 can cut the premium by as much as 25%.
The catch is timing. You collect the savings a little at a time, every year you don’t file a claim, and you pay the higher deductible all at once on every claim you do file. Say moving from $500 to $1,000 saves $125 a year. It takes four claim-free years for the savings to cover the extra $500 out of pocket.
That’s why your emergency fund decides it. One hailstorm can dent your car and your roof on the same afternoon, and that’s two deductibles due at once. Some homeowners policies also carry a separate wind or hail deductible, usually 1% to 5% of the home’s insured value, that stays in place whatever you pick for the standard one.
Run the numbers at your next renewal.
- Get quotes at your current deductible and at $1,000 for each policy.
- Divide the extra out-of-pocket cost by the yearly savings to find your break-even in claim-free years.
- Check that your emergency fund could cover both new deductibles at once, plus any wind or hail percentage on your home.
- Move the first year’s savings into that fund.
If you couldn’t pay the higher deductible this week without a credit card, keep the lower one until your savings catch up.
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