insurance

An Easy Way to Save on Homeowners Insurance

Boost your home-insurance deductible and you’ll not only reduce your premiums but also avoid filing small claims that could cause a rate hike.

How high a deductible can I get on my homeowners insurance? If I boost my deductible, how much can I save on my premiums?

If your deductible is $500 now, increasing it to $1,000 can lower your premiums by up to 20%. Most insurers offer much higher deductibles, too, which is a popular strategy for people who have enough money in emergency funds to cover potential costs. Raising your deductible is a good way to reduce your premiums, and it makes you less likely to file small claims that could result in a rate hike.

At Chubb, about half of the wealthiest customers choose a deductible of $10,000 to $50,000. “For homes here in Malibu that are valued at $10 million to $25 million, having a $25,000 deductible isn’t out of the ordinary at all,” says Derek Ross, president of Kulchin Ross Insurance Services, an independent agency in Tarzana, Cal.

The higher the deductible, the bigger the premium savings. Let’s say, for example, you have a policy with Fireman’s Fund with a $1,000 deductible and a $3,000 annual premium. You’d save about 24% by boosting your deductible to $2,500, 37% by raising it to $5,000, 47% by raising it to $10,000 and 53% by raising it to $25,000. Compare the premium savings with the extra dollar amount at risk to make sure that boosting your deductible is worthwhile.

You should file a claim only if it is at least several hundred dollars more than the deductible. “If your insurer raises your rate by 10% for three to five years after you have a claim, that could easily exceed the amount the insurer paid beyond the deductible,” says Ross. Whatever deductible you choose, keep enough money in an emergency fund to self-insure up to the deductible -- or even a few hundred dollars more.

The risk of self-insuring may not be as high as you think. The average person files a homeowners insurance claim only once every eight to ten years, says Jeanne Salvatore, of the Insurance Information Institute. You could take the money you save in premiums and add it to your emergency fund each year so that you’re prepared when you do have a claim, recommends Ross. You could also use the extra money to boost your dwelling, property and liability coverage levels by tens of thousands of dollars.

Most Popular

Education is Key: 3 Financial Lessons for Retirees Nearing Retirement
retirement planning

Education is Key: 3 Financial Lessons for Retirees Nearing Retirement

When it comes to retirement planning, educating yourself can keep you from making big mistakes. Here are three key lessons that everyone preparing for…
May 24, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022

Recommended

Short-Term Insurance Plans' Good, Bad and Ugly
retirement

Short-Term Insurance Plans' Good, Bad and Ugly

You'll need a squinty-eyed analysis to gauge the value of short-term care insurance plans and if they're right for you.
May 26, 2022
Things You’ll Regret Keeping in a Safe Deposit Box
savings

Things You’ll Regret Keeping in a Safe Deposit Box

Locking up certain important documents and valuables in a bank vault could turn into a headache for you or your heirs.
May 18, 2022
7 Things Medicare Doesn’t Cover
Healthy Living on a Budget

7 Things Medicare Doesn’t Cover

Medicare Part A and Part B leave some pretty significant gaps in your health-care coverage. But Medicare Advantage has problems, too.
May 4, 2022
Which Documents to Keep, Which to Shred and Which to Scan
home insurance

Which Documents to Keep, Which to Shred and Which to Scan

A speedy recovery from disaster can depend on your recordkeeping. Kiplinger’s Personal Finance writer Rivan Stinson tells us how to get our papers in …
May 4, 2022