Author Topic: Increase Homeowner's insurance deductible?  (Read 2586 times)

Jaketucson

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Increase Homeowner's insurance deductible?
« on: January 24, 2014, 10:59:32 AM »
This is probably a no-brainer, but my dad sold insurance for a living so I think I have a psychological barrier to overcome...I'm looking for confirmation that this is a good move, or for any advice I may not be thinking about.

Currently our homeowners insurance has a $1,000 deductible and annual premium of $662.30.  I want to increase the deductible to $5,000 as we have the resources to handle this amount if anything were to happen.  This would reduce the premium to $459.57 which is $16.89/month savings.  This savings would go to paying off a student loan which we are already paying off on an accelerated schedule.  The goal is to have that loan paid off in 3 years; the additional $16.89 would knock that down to 2.5 years.  After that  it would probably go to our Roth or to the mortgage principle. 

I've never had a claim against any car or rental/homeowner insurance so far in my life (I'm 36).  In my head I understand that statistically I will probably never have a claim on my homeowners insurance.  I've already upped the deductible on my car insurance, but that's a much smaller financial hit than if something were to happen to my house.  In my gut I'm nervous about upping the deductible on the house insurance just because it seems there's more at stake if something were to happen.

Number-wise here is where I'm stuck and I don't know if I'm figuring this correctly or if it even matters:  Assuming no interest, it would take over 19 years to make up the $4000 difference in deductibles if I ever had to pay it (4000/202.68 annual savings = 19.73 years).  Investing at a conservative 5% makes it a 13-14 year breakeven.  Am I off-track with this line of thinking?  Any advice is appreciated!  Thanks!

Frankies Girl

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Re: Increase Homeowner's insurance deductible?
« Reply #1 on: January 24, 2014, 11:53:32 AM »

I upped my deductible on my homeowners insurance last year to the same amount (I think that was the max?) My reasoning is that I have access to well over the amount within a day's notice, it would not impact my day to day living. My insurance is significantly higher due to where I live (SE Texas and in hurricane zone) so the savings were a bit more than yours.

I have actually had to make a claim in the past (before I upped the deductible) so there is a bit higher chance of me actually having to make a claim, and I'm still not worried.

I wouldn't start overthinking the numbers about what would happen if you had to pay it and what interest and gains that would effect - you're taking a small gamble that you'll never have to pay it, and most likely you won't.

acroy

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Re: Increase Homeowner's insurance deductible?
« Reply #2 on: January 24, 2014, 12:22:44 PM »
heck yes!
I'm carrying a 5% deductible (around $9k), around $400/yr premium. The 'standard' 1% or $1k deductible would make the premium close to $2k.
Lots of roofs replaced in N Texas every year! :)

Milspecstache

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Re: Increase Homeowner's insurance deductible?
« Reply #3 on: January 24, 2014, 06:07:12 PM »
Reading this made me check my current property insurance.  Sure enough, by raising my deductible from $250 to max out at $1000, I'll save $18 over the next year.  I knew my auto deductibles were at $1000 but forgot this one.  Thanks!