Should I raise my deductible to $10,000 to help offset the cost of rising premiums?

15 May

According to industry reports, homeowners are raising their deductibles to $5,000 to $10,000 to help offset the cost of rising premiums. 

While raising a deductible into the stratosphere will absolutely lower your homeowner insurance premium, it does mean that you will have to cover your deductible amount in the event you have to make a claim on the policy.

The majority of homeowners policies come with a standard deductible that ranges from $1,000 to $2,500 but many homeowners are increasing their deductible amount. A recent report from Guaranteed Rate Insurance found that the number of homeowners choosing a deductible in the standard ranges has decreased by 17% while deductibles in the $5,000 to $10,000 range have increased 49%.

Insurance premiums have been headed up in the last few years, in fact the average premium in the U.S, has gone up over 20% from 2021 to 2023, according to Insurify. Experts expect the average rate to go up another 6% pushing the average up to $2,500 which will most likely lead to more homeowners choosing larger deductibles. 

Rising homeowner insurance costs are even leading to homebuyers backing out of a home purchase once they discover the cost to insure the home. 

“Homes might sit on the market for longer, prices are being forced down, and deals are falling apart,” a recent report said. “And it’s expected to only get worse as communities continue to grapple with increasing climate risks and insurance premiums.”

A high-deductible policy can be a risky strategy, particularly if you can’t easily afford it, but it is always a better idea than going without insurance or severely underinsuring your property. 

Homeowners Choosing Higher Deductibles 

As insurance premiums head higher due to climate change, inflation and other factors, policyholders are moving to higher deductible to lower their premiums. According to a recent Money Magazine article, data from Matic confirms policyholders are choosing higher deductibles to keep their coverage affordable. 

“What’s happening is that insurance rates are rising, consumers are under pressure, and so they’re increasing deductibles to try and combat the price increase,” Lee Maliniak, chief product officer at Matic said in the recent Money article. 

Some policyholders have found their insurance company pushing them towards a higher deductible at their renewal. While increasing your deductible can help keep more money in your pocket, it can be risky if you have to cover it after a claim. 

“If there is a situation where you have to make a claim, you don’t want to find yourself with a deductible so high that you can’t pay it,” Maliniak said in the Money article. 

Insurance agents often recommend a higher deductible to customers who have the resources to handle a higher payment in the event they have to make a claim as the savings is often worth the risk. According to policyholders who move from a $500 deductible to a $2,500 deductible save an average of $500 per year. 

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