Author Topic: $25,000 Homeowners deductible  (Read 1908 times)

Bucksandreds

  • Pencil Stache
  • ****
  • Posts: 855
$25,000 Homeowners deductible
« on: September 15, 2019, 12:30:43 PM »
Going from a$2500 to a $25,000 deductible changes my homeowners insurance from about $600 per year to $294. Would you do it? Iím in Ohio above any flood plains. No hurricanes, no earthquakes, Iíd put $300 in my pocket every year but risk $22,500 if something happens.

minimustache1985

  • Stubble
  • **
  • Posts: 248
Re: $25,000 Homeowners deductible
« Reply #1 on: September 15, 2019, 01:21:39 PM »
Personally, no.

I grew up in Ohio and while our house wasnít, people in our neighborhood had homes ravaged by tornadoes (everyone was fine, but several had to move out during repairs bc of structural damage), the gym my dad went to had the roof ripped clean off.  Also, while insurance typically wonít cover things that age out, hail/weather damage to your roof can easily be several thousand (especially if there is associated water damage), and Ohio gets that kind of weather all the time.

22,500/300=75 years you need no extensive claims to get a payback on that.  Not worth the risk to me for that savings.  Also flooding and earthquakes probably arenít covered at any deductible, those are often separate riders.

Papa bear

  • Handlebar Stache
  • *****
  • Posts: 1422
  • Location: Ohio
Re: $25,000 Homeowners deductible
« Reply #2 on: September 15, 2019, 02:07:28 PM »
It doesnít seem like enough of a drop in premium.  But I agree with OP, chance of catastrophe is very low in Ohio outside of flood plains.

Fire is probably most likely.


Sent from my iPhone using Tapatalk

Bucksandreds

  • Pencil Stache
  • ****
  • Posts: 855
Re: $25,000 Homeowners deductible
« Reply #3 on: September 15, 2019, 02:32:19 PM »
Thanks for the input. Does anyone have any stats about the odds of making a homeowners claim by state?

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 829
Re: $25,000 Homeowners deductible
« Reply #4 on: September 15, 2019, 04:34:43 PM »
Would depend, too, on the value of the home. A $100,000 home? Keep the low deductible. A million dollar home? Definitely go with the higher deductible, you could make that up by picking cheaper fixtures for the rebuild.

Loren Ver

  • Pencil Stache
  • ****
  • Posts: 646
  • Location: Midwest USA
  • I Retired. Yah!
Re: $25,000 Homeowners deductible
« Reply #5 on: September 16, 2019, 06:49:34 AM »
That jump in price vs savings looks ridiculous to me.  All the people I know that have had to make insurance claims on house have been for:
1. Fire - neighbors electrical set both houses on fire.
2. High straight line winds, messed up siding and roof.  Luckily it didn't rain before they could get it covered.
3.  Lightening strike near by.
4.  Being robbed, stuff stole and damage to doors/windows

These were all in Indiana, which has similar issues to your state. 

Of course part of this equation is also your ability to take on 25000 if you house is destroyed while paying out of pocket for stop gap measures before insurance comes in, possibly during a bad recession.   I like my emergency fund to cover deductibles (house, car, medical), that would be a huge part of my efund, as in almost all of it.

slappy

  • Pencil Stache
  • ****
  • Posts: 989
Re: $25,000 Homeowners deductible
« Reply #6 on: September 16, 2019, 08:23:38 AM »
Is there anything in the middle? $5k or $10k deductible?

Do you have $25k that you could use in the event of a claim? With that high of a deductible, I'm guessing you would never make a claim, except in the case of a total loss due to fire or something. So you would want to make sure you had the money for anything you need to cover (like others have said, roof or something like that).

NonprofitER

  • Stubble
  • **
  • Posts: 185
  • Location: Texas
  • Reaching FIRE w/ High Purpose (Low Pay) Nonprofit
Re: $25,000 Homeowners deductible
« Reply #7 on: September 16, 2019, 09:01:21 AM »
Our family has experienced two total loss natural disasters (earthquakes while living overseas, followed by a house fire in TX). None of these events were predicted. The earthquake(s) occurred on a "blind" fault, and the house fire was a freak accident caused by drought + forest fire that spread to a city.  All of them resulted in months of stress, exhaustion, relocation, $$$ buying for very short-term needs and replacing virtually everything we owned.  And ridiculous amounts of hours dealing with insurance agents, creating excel spreadsheets of everything we owned so the insurance company could calculate and devalue everything based on age/use, etc. only to get us up to the policy max, etc.
 
We also had a dishwasher leak one time when a house-sitter started our dishwasher when we were out of town. We returned home to ~1000 sq ft of ruined floor and wet/molding lower kitchen cabinets. Even that event took about 4 months and stupid amounts of money to resolve start to finish (water remediation, moving all the furniture + baseboards to install new flooring, waiting on insurance to approve, living upstairs without a full kitchen for 3 weeks, closing out with all receipts, etc.). 
 
We are big proponents of healthy insurance policies - esp "replacement value" riders. We have big deductibles, but I don't think I'd ever want a $25k deductible with our bad luck.  Of course, logically, these are rare events... but we've met a surprising number of people with house fires, floods, etc.
Į\_(ツ)_/Į


slow hand slow plan

  • Stubble
  • **
  • Posts: 126
  • Location: Colorado ish
  • Living the dream
Re: $25,000 Homeowners deductible
« Reply #8 on: September 16, 2019, 09:09:13 AM »
nope.... one word ....hail; the most common claim in almost all of the Midwest

MissNancyPryor

  • Pencil Stache
  • ****
  • Posts: 547
  • The Stewardess is Flying the Plane!
Re: $25,000 Homeowners deductible
« Reply #9 on: September 16, 2019, 09:21:25 AM »
Trees topple on houses where I live a lot and if a neighbor's tree hits my house it is my bill to pay.  I also have a friend whose entire first floor was ruined by an overnight back up of her septic system this year.  It was a $40K disaster.   

The break on the cost is not nearly enough to take the risk in this case it seems.  I am also comparing it to my desire to have a catastrophic health insurance policy where my OOP is about $8000 and the savings is very aggressive monthly compared to a gold-level plan, and there is also a greater sense of control (whether this feeling is realistic or not is debatable). 

Weather, hidden mold and termites, sewage backups; these things seem less controllable. 

This homeowners' policy savings is not a good gamble IMHO, the difference annually is a pittance. 

Duke03

  • Bristles
  • ***
  • Posts: 301
Re: $25,000 Homeowners deductible
« Reply #10 on: September 16, 2019, 10:33:25 AM »
NO WAY I'd do that deal.  You need to view insurance companies just like a casino.  They know the odds and stack the deck in their favor.

Jon Bon

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Midwest
Re: $25,000 Homeowners deductible
« Reply #11 on: September 16, 2019, 10:38:56 AM »
This is bat shit insane and being cheap and stupid at the same time.

Fun story, my friend had a dead tree limb punch a hole in his roof. Total payout was about 30 grand. For a single tree limb! 

I would bet that your lender would not let you have such a huge deductible. (if you have a loan that is)

Seriously though, 25k deductible is about the same as being 100% self insured. Does that sound like a good idea to you? The purpose of insurance is absolutely NOT to get your moneys worth out of it. Trust me, pay the yearly premiums and forget about it. Home owners insurance IMO is one of the best deals out there.



 

Swish

  • 5 O'Clock Shadow
  • *
  • Posts: 97
  • Age: 34
  • Location: Canada
Re: $25,000 Homeowners deductible
« Reply #12 on: September 16, 2019, 10:50:02 AM »
We have rentals and the deductibles range from $1k-10k. It really just depends on the discount you get in return and the risk associated with the home. The gap you cited is too wide for me to have a $25k deductible. I would either get the lower one or self insure at that point depending on the situation (value of home, debt, long term plans for property, cost to replace etc.).

Sibley

  • Magnum Stache
  • ******
  • Posts: 4288
  • Location: Northwest Indiana
Re: $25,000 Homeowners deductible
« Reply #13 on: September 17, 2019, 08:07:02 AM »
It's high risk. IF you have a large enough stash where you could pay out $25k without pain, you could consider it. Otherwise, nope.

Kayad

  • 5 O'Clock Shadow
  • *
  • Posts: 67
Re: $25,000 Homeowners deductible
« Reply #14 on: September 22, 2019, 10:23:42 PM »
10x increase in deductible for 1/2 premium rate? Um...  No.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5290
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: $25,000 Homeowners deductible
« Reply #15 on: September 22, 2019, 10:49:15 PM »
I'd do it. The insurance companies know the odds better than you do, and they're taking roughly the same profit margin either way. The question is whether you can afford to pay the $25k if something happens. You buy insurance to protect you from things that would be a major setback in your financial life. If you're just getting started with your journey and barely have an emergency fund started, a $25k hit to your net worth is a big deal. Once you get closer to FI, the effect of a $25k expense is much less. Making a habit of taking risks where the odds are in your favor is the quickest path to wealth. Sometimes the risks won't pan out, but more often than not they will.

iris lily

  • Magnum Stache
  • ******
  • Posts: 3722
Re: $25,000 Homeowners deductible
« Reply #16 on: September 23, 2019, 07:33:05 AM »
This is s a risk I would probably take,  but then I have high assets.
I have considered cheap real estate in Florida with no hurricane insurance.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 829
Re: $25,000 Homeowners deductible
« Reply #17 on: September 24, 2019, 03:37:50 PM »
Quote
nope.... one word ....hail; the most common claim in almost all of the Midwest

Yeah!  My niece and her husband had a hailstorm at their house in Montana recently while they were at work - broke out all the windows on one side of the house and terrible water damage inside.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6702
  • Location: BC
Re: $25,000 Homeowners deductible
« Reply #18 on: September 26, 2019, 01:42:38 AM »
I have a $10k deductible, which I can easily pay from long term savings if needed.

We did get a larger reduction in premiums, but not a lot more.

I found that when I had a $2k deductible, I wasn't claiming the $2500 losses, anyway.   I actually would only claim something over $10k... I only need to protect against the larger stuff, not the more common stuff like a new roof for hail damage on a 15 year old roof, etc.

Jon Bon

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Midwest
Re: $25,000 Homeowners deductible
« Reply #19 on: September 26, 2019, 08:59:25 AM »
Having a 25k deductible is like refusing to wear a seat belt because you are a good driver.

You will probably be fine, you also might be completely screwed.


iris lily

  • Magnum Stache
  • ******
  • Posts: 3722
Re: $25,000 Homeowners deductible
« Reply #20 on: September 26, 2019, 09:19:18 AM »
Oh also, we own one piece of real estate with two dwellings on it and we carry only liability  insurance for it. They are both vacant and I didnít want to lie to the insurance company about them being occupied, and vacant property insurance is expensive.

 Sometime ago on this website we discussed this and I realized that since these are both 1870ís structures they could not be demolished if severely damaged. Say, a truck hit one of them (one sits practically  on the street )

But I am old and give less of a shit than I once did, and now I would just ignore the damn historic code for that neighborhood and bulldoze the building if it was damaged significantly. So fine me, City! When they get the drug runners out of that corner of that neighborhood maybe I will cooperate better.

We have already fixed up buildings according to the letter of the historic  code and we see others flaunting it daily.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5290
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: $25,000 Homeowners deductible
« Reply #21 on: September 26, 2019, 01:30:48 PM »
Having a 25k deductible is like refusing to wear a seat belt because you are a good driver.

You will probably be fine, you also might be completely screwed.

This is a terrible analogy. Not wearing a seatbelt is more like avoiding insurance entirely.

Trying to fit it into the car crash metaphor, a low deductible is like wearing a leather jacket in the car to protect yourself from having broken glass scratch your arms in the event of a crash. Sure, nobody wants a few scratches, but they won't kill you. If you want to save money on outerwear and accept the risk of a few scratches in the crash, that's a very reasonable trade-off to make.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 13071
  • Age: 62
  • Location: NorCal
Re: $25,000 Homeowners deductible
« Reply #22 on: September 26, 2019, 01:43:53 PM »
I'd do it. The insurance companies know the odds better than you do, and they're taking roughly the same profit margin either way. The question is whether you can afford to pay the $25k if something happens. You buy insurance to protect you from things that would be a major setback in your financial life. If you're just getting started with your journey and barely have an emergency fund started, a $25k hit to your net worth is a big deal. Once you get closer to FI, the effect of a $25k expense is much less. Making a habit of taking risks where the odds are in your favor is the quickest path to wealth. Sometimes the risks won't pan out, but more often than not they will.
I think you also have to consider the value received for the money saved. The savings don't mitigate the potential future loss, IMO.

stoaX

  • Pencil Stache
  • ****
  • Posts: 580
  • Location: South Carolina
  • 'tis nothing good nor bad but thinking makes it so
Re: $25,000 Homeowners deductible
« Reply #23 on: September 26, 2019, 01:51:05 PM »
I'd do it. The insurance companies know the odds better than you do, and they're taking roughly the same profit margin either way. The question is whether you can afford to pay the $25k if something happens. You buy insurance to protect you from things that would be a major setback in your financial life. If you're just getting started with your journey and barely have an emergency fund started, a $25k hit to your net worth is a big deal. Once you get closer to FI, the effect of a $25k expense is much less. Making a habit of taking risks where the odds are in your favor is the quickest path to wealth. Sometimes the risks won't pan out, but more often than not they will.
I think you also have to consider the value received for the money saved. The savings don't mitigate the potential future loss, IMO.

I agree, the $300 savings wouldn't be quite enough to convince me.  But..I am now inspired to look into increasing my current $3000 deductible. 

Dicey

  • Senior Mustachian
  • ********
  • Posts: 13071
  • Age: 62
  • Location: NorCal
Re: $25,000 Homeowners deductible
« Reply #24 on: September 26, 2019, 10:23:00 PM »
I'd do it. The insurance companies know the odds better than you do, and they're taking roughly the same profit margin either way. The question is whether you can afford to pay the $25k if something happens. You buy insurance to protect you from things that would be a major setback in your financial life. If you're just getting started with your journey and barely have an emergency fund started, a $25k hit to your net worth is a big deal. Once you get closer to FI, the effect of a $25k expense is much less. Making a habit of taking risks where the odds are in your favor is the quickest path to wealth. Sometimes the risks won't pan out, but more often than not they will.
I think you also have to consider the value received for the money saved. The savings don't mitigate the potential future loss, IMO.

I agree, the $300 savings wouldn't be quite enough to convince me.  But..I am now inspired to look into increasing my current $3000 deductible.
Yup, I just raised them on all of our rentals, but I got a LOT more bang for my buck.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5290
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: $25,000 Homeowners deductible
« Reply #25 on: September 27, 2019, 12:38:09 PM »
I'd do it. The insurance companies know the odds better than you do, and they're taking roughly the same profit margin either way. The question is whether you can afford to pay the $25k if something happens. You buy insurance to protect you from things that would be a major setback in your financial life. If you're just getting started with your journey and barely have an emergency fund started, a $25k hit to your net worth is a big deal. Once you get closer to FI, the effect of a $25k expense is much less. Making a habit of taking risks where the odds are in your favor is the quickest path to wealth. Sometimes the risks won't pan out, but more often than not they will.
I think you also have to consider the value received for the money saved. The savings don't mitigate the potential future loss, IMO.

The actuaries at that insurance company would probably disagree with you.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 13071
  • Age: 62
  • Location: NorCal
Re: $25,000 Homeowners deductible
« Reply #26 on: September 27, 2019, 05:34:31 PM »
I'd do it. The insurance companies know the odds better than you do, and they're taking roughly the same profit margin either way. The question is whether you can afford to pay the $25k if something happens. You buy insurance to protect you from things that would be a major setback in your financial life. If you're just getting started with your journey and barely have an emergency fund started, a $25k hit to your net worth is a big deal. Once you get closer to FI, the effect of a $25k expense is much less. Making a habit of taking risks where the odds are in your favor is the quickest path to wealth. Sometimes the risks won't pan out, but more often than not they will.
I think you also have to consider the value received for the money saved. The savings don't mitigate the potential future loss, IMO.

The actuaries at that insurance company would probably disagree with you.
Any time I read or hear the word "actuary" it makes me think of Jack Nicholson in "About Schmidt". Overall, I think I'm okay with an actuary disagreeing with me.

DaMa

  • Bristles
  • ***
  • Posts: 438
Re: $25,000 Homeowners deductible
« Reply #27 on: September 30, 2019, 08:52:24 AM »
I would do it, but the premium savings seem low to me.  I recently went from $1,000 to $10,000 deductible (max offered) for a $300 per year reduction.  My house is only worth about $70k though.