Whether it’s Obamacare, car accident, or property insurance claim, the “d” word gets treated like something we aren’t allowed to say in Kindergarten. Either the old guy on the TV at your lunch spot is dropping it like a statistic that sounds bad, or it’s the subject of bad news at the billing desk at the doctor’s office; for some reason, it’s just unpleasant. But what is it?
Dictionary.com defines deductible as “the amount for which the insured is liable on each loss, injury, etc., before an insurance company will make payment.” In terms of homeowner’s/property insurance, that means the part of the claim that you pay. So, how do you prepare for that, and once you file, what do you do?
Now, I am not acting as an insurance agent or adjuster here, so we are going to keep terms very general here. But, here are some good questions to ask yourself to start out.
Do you know how much your deductible is?
Not “how much it was last time you looked.” As a responsible property owner, you should *always* know the answer to this, or at least know where you can find the answer in 2 minutes or less. Insurance companies can change this at renewal time, and they don’t always put in a poster-sized written notice in red ink. Knowing is half the battle, so when you are done reading this, go check. Don’t worry, I have other homework for you.
If lightning struck your home tomorrow, could you afford to pay your deductible?
If you don’t know the answer to 1, then just guess. Most of you will answer “yes” to that, even if you kinda cocked your head back and forth a few times and shuffled your feet. An insurance agent told me years ago that whatever your deductible is, you should stick that amount in a savings account and leave it alone. You don’t buy insurance to cover the things that you plan for, you buy it for the things that you can’t plan for, which almost always means sudden and unexpected. So if you can’t plan for what you’ll need the deductible for, then plan to already have it set aside. That way, you’re planning for what you can’t plan for.
If you answered “no,” then consider changing your deductible. You can’t change everything in life, so change the things that you can.
Why do I have to have a deductible?
That’s how it works. I don’t make the rules. Donate to my Senate election PAC, and I’ll remember you when I get to DC.
If I lower my deductible, will my premium go up?
Probably, but find out how much before you panic. Some of our customers have told us that the difference was less than expected. Before writing this, I pulled a quote with “an expensive insurance company,” and found that for a $250,000 policy, the difference between a $1000 deductible and a $2500 deductible was about $30 per month. So, you might be able to put that $30 into savings each month, and make up the difference in just over 4 years. Just plan accordingly for you and your family. I am writing a blog, not setting up your life plan.