If your own your own house, it is very crucial that you have sufficient homeowner’s insurance coverage to protect your investment. Standard plans typically come with low deductibles, but with higher premiums.
But if saving money on your insurance costs is a priority, and if you can afford it, an insurance plan with a higher deductible might be a more viable option for you.
How do high deductible insurance policies work?
When you purchase a homeowner’s insurance plan for your home in Raleigh, you can pick how much your deductible will be. Generally speaking, deductibles can be between $500 and $100,000 depending on how much you can comfortably afford in case you need to end up filing a claim.
Your insurance provider will calculate your deductible as a percentage of the value of your home. For example, if your insurance provider utilizes a 1% baseline and your home’s value is $275,000, then your deductible will be $2750.
The higher your deductible, the lower your premiums.
Basically, you will get lower premiums if you choose a higher deductible. Do note though that what you stand to save would differ according to where your home is located and which insurance provider you chose, but you could generally expect to save a couple of hundred dollars annually. And if you don’t file a claim for a couple of years, you’re essentially putting a ton of money back into your savings.
Does this insurance plan have issues?
To start, while your deductible might be fixed, there’s a chance that the amount could change. For example, your deductible will increase as the value of your home increases. This means that if you do not have ample savings, you would need to come up with the money if you can’t cover your deductible in the event that your home sustains damage.
You also need to aware of other deductible costs that might come up. For instance, if your insurance plan has built-in clauses for covering particular catastrophes, you may need to pay separate deductibles for these when filing a claim.
There’s a chance your premiums can increase.
Just because you have a high deductible doesn’t mean that you’ll automatically lock in low premiums. Your insurer can decide to increase your premiums when you file a claim, resulting in a 9%to 30% increase in your premium.
When this occurs, the savings you managed to set aside from going with a high deductible will be for naught. In addition, in the event that your credit score declines prior to renewing your homeowner’s insurance plan, your insurance provider might consider you a high-risk client and raise your premiums.
Put simply, if your credit score is great and you can comfortably afford a high deductible insurance plan, then all signs seem to point to going with a high deductible. However, it’s still best to shop around and look at the different rates that different insurance providers can offer.
Lastly, figuring out how much you can potentially save if you go with a higher deductible instead of a flat fee could help you decide whether or not it’s worth it.