$2,500 vs $5,000 deductible

[justmeoverhere]

My insurance went up about $1,500 - this is for home and auto combined. My new home premium will be $5,420 with a $2,500 deductible. I can lower the premium by $1,000 to $4,430 by raising my premium to $5,000.

I can afford to pay $5,000 or even $7,000 if something catastrophic were to happen to my home. I've had the house for 1 year and haven't had any unforeseen events take place.

Is it a no brainer to take the higher deductible or there something I'm not seeing here.

 

[mjb048]

@justmeoverhere Feel free to shop around just to make sure you’re getting a fair price

Personally, I’m a major advocate of higher deductibles on home policies. lower deductibles incentivize filing smaller claims and filing excessive home claims can very easily make you house poor or nearly uninsurable

use the savings to shore up a rainy day fund and handle small things out of pocket. this subreddit is full of people who file $1500 claims with a $1k deductible then their rate goes up $300 a year for the next three years so they “lost” money on that claim lol

but $300 a year would be a massive steal and you’d make out like a bandit if it was the result of a $50k-$100k fire or tornado damage

 

[jkb2011]

@mjb048 I want to urge insureds sometimes to withdraw their claims. Happened this morning. Extremely minor water damage to a basement, spoke with contractor on site, agreed to $1,800 for repairs, insureds have $1k deductible. I really can’t advise people on potential premium increases but most people just want the payout.

I’ve gotten a few calls from the elderly a year after their claim yelling at me when their rates increased after an extremely minor claim. But a lot of them are on a fixed income and the houses they live in are falling apart around them because they can’t maintain them anymore. It’s honestly heartbreaking sometimes.

 

[wingsoffaith]

@justmeoverhere Based on those number, it worth it. You just need to go 2.5 years without a claim.

I would do it.

 

[researchertony]

@justmeoverhere Here's the quick math. It would take you 2.5 years to recoup the money you would spend in the event of a loss (2,500 additional deductible/1000 savings per year = 2.5). Typically have losses 1 in 7 years in a low-risk environment or 1 in 5 years in med-higher risk. The odds are you will be out ahead if you maintain a 5k deductible and it won't incentivize you to file a small claim.

 

[vitagenlab]

@researchertony Auto side. No experience with home. What are people claiming once in 5-7 years? In well over 20 years we claimed once a flooded basement from a burst pipe.

 

[thegoalie]

@vitagenlab It depends on the area. In DFW, Texas, there are a ton of Roof Storm Chasers that encourage people to file claims like every other year. The result is that a bunch of big and small carriers now pulled out of the market and/or have a ton of restrictions.

 

[godisomnipotent]

@thegoalie What is a roof storm chaser?

 

[thegoalie]

@godisomnipotent Small, unestablished roofers that wait around for hail/windstorm to hit a certain area, then swoop in and try and make the big buck. They go door to door with aggressive sale tactics. Almost always promise to "cover" the deductible, which guess what? That just means that you're getting a lower quality replacement shingles.

They promise 10 years or whatever warranty, but most people don't know that you can't possible find them once they're done with their job, making it meaningless.
They're one of the cause of the mess we're in, at least in our area.

 

[godisomnipotent]

@thegoalie Got it, good to know.

 

[researchertony]

@vitagenlab Pretty wide range. Wind losses, tree issues, HVAC leaks, and light construction homes on the West Coast tend to have claims more often but the losses tend to be smaller.

 

[adoptedwatcher]

@justmeoverhere

I can afford to pay $5,000 or even $7,000 if something catastrophic were to happen to my home.

You've answered your own question. A higher deductible is a good idea when you have the cash set aside to cover your own small losses.

 

[peinopela]

@justmeoverhere That’s up to you, sounds like you should. It’ll theoretically take you 2.5 years to make it worth it in the event of a claim. Or you can shop around.

 

[annah]

@justmeoverhere You are lucky. My wind and hail in Texas is 2% on a house valued at 900K. You can imagine how much is my deductible- $18K.
With so many hailstorms and so many claims, insurance companies have no choice but to raise the premium (I pay close to 5K for this )

 

[oupajoe]

@justmeoverhere Ask yourself if $x is worth it to you for the difference in deductible.

I like to put the premium savings in an account so that it is there when I have a claim. I'll feel better about the higher deductible. I feel really good when the account accumulates multiple $1,000s.

And, do shop for a better deal. Make sure you understand why the premium is lower. It always means the carrier is planning to pay fewer claims.

 

[charlyfry]

@justmeoverhere Our premium went from 4300 to 750 when we raised our deductible from 1 to 5% (about 17k). Wish I had made that choice years ago.

 

[thegoalie]

@charlyfry $2,500 to $5,000 is fine; but 1% to 5%, you need to think long and hard about that. You are basically saying you are financially well off enough to sustain a $17k unexpected expense.

If someone loses control of their car and crash into your house, tree fall onto the roof, or something that cause an $18k damage, you will get a check of $1k. Things happen in life. Are you sure this is the right choice?

 

[makingachange2018]

@justmeoverhere Have you shopped around at all? Where are you located?

 

[justmeoverhere]

@makingachange2018 I looked at Amica and it was a lot higher. Im in New York

 

[xthemessenjahx]

@justmeoverhere Call a broker.