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.
Use our tool - in partnership with Bankrate - to compare home insurance rates today.
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.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
-
Is a Phased Retirement Right for You?
Want to keep working, just not as hard? A phased retirement may just be the answer.
By Kimberly Lankford Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
Credit Report Error? They All Matter
credit & debt Don't dismiss a minor error. It could be the sign of something more serious.
By Kimberly Lankford Published
-
Insurance for a Learning Driver
insurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
By Kimberly Lankford Published
-
529 Plans Aren’t Just for Kids
529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
By Kimberly Lankford Published
-
When to Transfer Ownership of a Custodial Account
savings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
By Kimberly Lankford Published
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
By Kimberly Lankford Published
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
By Kimberly Lankford Published
-
What Travel Insurance Covers When Planes Are Grounded
Travel Your travel insurance might help with some costs if your trip was delayed because of the recent grounding of Boeing 737 Max planes.
By Kimberly Lankford Published
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
By Kimberly Lankford Published