How to choose a deductible for your homeowners insurance policy

Your home insurance deductible is one of the easiest things to use to help control the cost of your homeowners insurance.

When choosing a deductible, what you are really doing is telling the insurance company how you view insurance.

What I mean by this, is the lower the deductible you pick, the insurance company knows you will statistically file more claims because there is not much skin in the game.  Since they know this, you typically over pay for your homeowners insurance because they charge more knowing the claims response costs are going to be higher with your policy.

With that being said, getting a deductible too high is also not beneficial at some point.  There is typically a nice break even point where the annual cost savings balances with the deductible.

Look for a good break even point within 7-8 years or less.  If you can take the savings you get with an increased deductible and put it in a savings account, it should pay for the additional out of pocket you get with a higher deductible.

($250 premium savings * 7 years) = $1750 savings over 7 years

Typical deductible of $1500 plus savings of 1750 means  any deductible less than $3250 is a good value.

Another consideration is the insured value of your home.  We find that if you can get your deductible in a flat dollar format for around the 1% of your insured value then you should also see a good value.

The deductible is only one part of about 4000 pieces of the puzzle, however it is the one you can control and is the easiest one that makes the biggest impact.

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