How to Choose a Deductible

Home Insurance Acumen Insurance HamiltonWhen purchasing auto insurance or home insurance, you’ll need to decide how much your deductibles should be. It’s an important decision because this is the amount you may have to pay out-of-pocket if you need to submit a claim.

What is a deductible? A deductible is the portion of an insurance claim you agree to pay on your own. Your insurance company picks up the rest. Generally speaking, the higher the deductible you choose, the lower your insurance rate. However, it’s important that you set your deductibles to an amount that you can comfortably afford.

Questions to ask yourself before selecting a deductible

No matter what type of insurance you’re buying, if there’s a deductible to be selected, there are a few questions to ask yourself to ensure you’re making the right choice.

1. How healthy is your rainy day fund?

If your rainy day fund has a few thousand dollars in it, then a higher deductible might make sense. You can draw on it in the event that you need to make a claim. But if your rainy day fund is only a few hundred dollars, then having a $1,000 deductible may be financially stressful. Paying a deductible after submitting a claim shouldn’t cause you to you lose sleep at night.

2. What is the value of the item being insured?

Car Insurance Hamilton Acumen InsuranceThis question doesn’t apply in every scenario. For example, your home is obviously worth more than the typical $500 deductible that many homeowners pick for their home insurance policies. But what about your auto insurance policy’s collision and comprehensive deductibles? The value of your car primarily comes into play when there’s an older car involved which can make choosing deductibles a bit tricky. In fact, depending on the value of your vehicle you may want to reconsider having collision or comprehensive coverage at all.

Let’s say you’ve got an older vehicle that’s valued at $1,100. Having collision or comprehensive coverage with $500 deductibles means the maximum payout should you need to submit a claim will be $600. Is the coverage worth it given the extra premium you’ll pay? It’s a balancing act and a personal choice but it’s something that needs to be thought out.

3. What’s the chance you’ll make a claim?

Often people select lower deductibles, so their out-of-pocket expenses are minimal at the time of a claim. They plan for the worst case “what if” scenario. But, if you’ve been fortunate to have never submitted a claim or have rarely needed to, and you can afford the deductible you ultimately choose, a higher deductible may help lower your annual premiums.

You’re not alone, there’s help

When you purchase your policy—whether it’s a home insurance policy or an auto insurance policy—you won’t be expected to make the deductible decision on your own. The insurance broker or agent on the other end of the phone when you’re buying your policy will help. But, having thought out these three questions and the possible answers will go a long way in making the decision that best fits your needs and budget.

Find the Plan to Cover Your Property

For over 30 years Acumen Insurance has been a leader in providing personal home and auto insurance products. We have always excelled in providing our clients with the best options to suit their needs and lifestyle. Let us help you choose the right home and auto insurance policy for you. Call and speak to one of our brokers directly 905-574-7000 or get a quote online now.

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