Home Insurance Deductible Savings Vary by State

28 Jul
Increasing Your Home Insurance Deductible

The bigger the increase in the deductible, the bigger the homeowners insurance savings.

There are many ways to lower your homeowners insurance premium but one of the best ways is to raise your deductible. Unfortunately, according to a study by insurancequotes.com, the benefit of raising your deductible can vary dramatically, depending on what state you call home.

The difference in savings can be astounding, with North Carolina residents pocketing a whopping 39 percent in savings while residents of Indiana manage a measly 6 percent when raising the deductible by the same amount.

How much can I save?

The study, which was conducted by Quadrant Information Services looked at the average premium decrease due to increasing a home insurance deductible on a two-story, single family home that was insured for $140,000. The study examined three different levels of premium increases in each state to determine where the biggest savings occurred.

According to the study, the bigger the increase in the deductible, the bigger the savings:

  • Increasing deductible from $500 to $1,000 resulted in an average savings of 7 percent.
  • Increasing deductible from $500 to $2,000 resulted in an average savings of 16 percent.
  • Increasing deductible from $500 to $5,000 resulted in an average savings of 28 percent.

While most of us are not going to bump our deductible all the way up to $5,000, even making a fairly modest $1,500 increase can result in savings of 16 percent. According to the National Association of Insurance Commissioners (NAIC), the average home insurance premium in the U.S. is $1,034. Shaving 16 percent off of that figure will put $165 a year in your pocket.

The savings can be even more dramatic in certain states. The top dog in the $500 to $2,000 category was North Carolina with residents of the Tar Heel state saving 39 percent on average which works out to a whopping $403 in savings every year, making the jump to a higher deductible well worth the added risk. North Carolinians who can afford a $5,000 deductible can almost cut their premium in half with average savings of 45 percent.

Rhode Island residents managed a second place showing with average savings of 27 percent and Pennsylvania rounded out the top three at 23 percent.

On the other end of the spectrum was Hawaii where homeowners can only expect savings of 5 percent, making a higher deductible not worth the added risk. Indiana was number two at 6.06 percent, just barely lower than Texas where a 6.07 percent savings was the average.

Should I Raise My Deductible?

While that is a question only you can answer, and the correct choice will vary depending on your financial situation there are a couple of things to consider.

Most industry experts do not recommend raising your deductible unless you can save a significant amount of money. If the premium savings allow you to make up the increased deductible amount in five years or less it most likely makes sense to increase it, if not, leave it where it is for now.

It is also important to consider how likely you are to make a claim. Some of the states where the savings was highest, Florida and Oklahoma for example, have a long history with natural disasters such as tornados and hurricanes. Nobody can predict when a natural disaster is going to occur but if you live in a high-risk area, bumping up your deductible may not be the best idea unless you can easily afford to cover it.

While saving money is great and raising your deductible is as easy as making a phone call to your insurer, covering that deductible when it comes time to make a claim is not as easy. You should never raise you deductible beyond the limit that you can easily afford to pay.

If you are unable to afford it, you may have to put off making repairs to your home in the event of a claim. This can not only be inconvenient, it can mean you lack the funds to make your home livable again in the event of a major claim. If your roof is severely damaged and you have a $5,000 deductible you can’t afford, it could easily mean the difference between a new roof keeping you dry and you living under a tarp until you save up the money.

Industry experts recommend putting your deductible amount in an interest bearing account and leaving it there. This way it is always there in the event of a claim and you don’t have to worry about covering it when disaster strikes.

If you are considering raising your deductible, it may be time to shop your policy. We can help! Simply enter your zip code to review competitive rates from up to 12 major home insurance carriers. Get affordable home insurance quotes today!

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