When you buy an insurance policy, looking for ways to save money on your monthly premium payments can be a top priority. Whether you are purchasing auto, health, or home insurance, you can choose to have a higher deductible to lower the price of the cost of the plan. However, the possible financial risks of a high deductible can outweigh the money you are saving every month with a lower insurance bill. Being required to pay a large amount at once may even cause someone to declare bankruptcy. At Elite Insurance Solutions, our clients often ask us how to pick an insurance deductible. While our recommendations vary from client to client, we would like to share with you some information from BankRate on how to choose a deductible that makes the best financial sense for you and your family.
What exactly is a deductible?
An insurance deductible is the amount of money you must pay out-of-pocket before your insurance policy begins to cover your costs. Depending on the policy, a deductible can range from a few hundred to thousands of dollars. Generally, the more money you are willing to pay each month on your premium, the lower your deductible.
What should I consider when choosing a deductible for an auto insurance policy?
How much money you can save by raising your auto insurance deductible depends more on the type of coverage you have. Since your comprehensive coverage pays for damage from theft, natural disasters, and other things beyond your control, having a lower deductible for that part of your car insurance policy can actually save you more money if an incident were to occur. However, when it comes to collision coverage, it can be financially smart to have a higher deductible, especially if you are a driver under the age of 50 with safe driving habits. Raising the deductible on your collision coverage can allow you to save up to $300 a year on your auto insurance premiums.
How big are the differences in home insurance premiums with a higher deductible?
When it comes to home insurance, the amount of money you will save by raising your deductible is relatively small. When choosing the deductible amount for your homeowner’s insurance policy, it is more important to think about the amount of money you could afford to spend in the event of an emergency.
What about health insurance?
Since preventive care is free under the Affordable Care Act, a healthy person with no young children can save quite a bit of money every month with a high-deductible health insurance plan. The main reason for this savings is that the premiums for a low-deductible plan can cost twice as much each month. However, families with small children and those with chronic illnesses can save more money in the long run with a health insurance policy with a lower deductible. Most importantly, as with homeowner’s insurance, you should be comfortable paying the amount of the deductible if a medical emergency were to happen.
No matter the category, choosing the best insurance deductible can be a complicated decision. Contact Elite Insurance Solutions to ask our experienced agents to help you make the right choice.