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Planning your financial future

Is raising my P&C insurance deductibles a good idea?

Raising your home or auto insurance deductible is a quick way to lower your bill, but do you have enough cash on hand to cover an emergency?

Raising your P&C insurance deductible

While nobody gets excited about paying their insurance bill, most of us are happy we did when a claim occurs. However, many of us would prefer to keep our monthly insurance budget as low as possible. Whether you're looking to save on your homeowner insurance, renter or auto policy, raising your deductible is a quick cost-cutting way to experience an immediate reduction on your bill. But is it really worth it?

Having the cash on hand

Yes, you can save money by raising your deductible. But what you need to keep in mind is that should a claim occur, you will be responsible for 100 percent of your deductible before the insurance company pays your claim. For example, raising your comprehensive deductible on your auto policy from $500.00 to $1,000 may drop your premium down some, but it won't do you a bit of good if you don't have that cash on hand to make the needed repairs. As a rule, it's generally not a good idea to increase your deductibles unless you have enough readily available cash.

Is the savings really worth it?

Sure you'll have to come up with more cash out-of-pocket when you have a claim, but there are certain types of insurance lines as well as individual situations that may be worth it if you do the math. For example, raising the deductible on your auto policy may not be prudent if you live in a high risk area and anticipate the possibility of having to make multiple claims. In this example, raising your deductible means you'll have to come up with a lot more money on each claim which may not be saving you in the long run.

Another example would be your homeowner policy. Essentially, your homeowner policy is there to restore your home' condition in the event of a loss - not serve as a maintenance policy for broken window, lose shingle, or other smaller repair. In other words, homeowner claims typically don't occur as frequently as many other lines of insurance. For this reason, many people feel that the savings experienced by raising their home insurance deductible can save them a lot of money on average.

It's up to you to determine if increasing your insurance deductibles is worth it. Speak to your insurance agent or company representative who can run you some quotes with various deductible ranges. This way, you can make the best choice to fit your individual needs.



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