If you’re fortunate enough to own a house, it is vital that you have sufficient insurance coverage to safeguard your investment. In general, standard insurance policies typically come with lower deductible but higher premiums. If you’re looking to maximize your savings on your insurance costs, consider getting a policy with a high deductible.

What is High Deductible Homeowners Insurance and How Does it Work?

When you avail of homeowners insurance for your home in NC, you will be able to pick the amount of deductible you’re willing to pay. Generally speaking, you can pay the average minimum, which is $500, or pay as much as $100,000. Homeowners insurance policies that offer high deductibles is typically estimated as a percentage of the value of the home. For example, if your insurance provider utilizes a 1% baseline and the value of your house is $275,000, you will need to pay a deductible of $2,750.

A High Deductible Equals Lower Insurance Premiums

The greatest benefit of having a higher deductible homeowners insurance plan is that it comes with lower premiums. How much you’ll be able to save will differ based on your provider and your location, but on the average, you stand to save hundreds of dollars every year. This also means that if you don’t file an insurance claim for a couple of years, you stand to save a lot more money.

Potential Issues with High Deductible Homeowners Insurance

For starters, while your deductible might be fixed, there’s a chance that it could still change. For example, as the value of your home increases, so will your deductible. If you do not have emergency savings, you might end up scrambling to raise money in the event that your home gets damaged and you don’t have the money to pay the deductible. In addition, if your insurance plan has built-in clauses that cover certain disasters, you may need to pay a deductible separate from your main deductible when filing a claim.

Your Insurance Premiums May Also Increase

Signing an insurance policy

A high deductible policy won’t guarantee that you will end up with lower premiums. In the event that you want to file a claim, there’s a possibility that your insurer might increase your rate by 9% to 32%. When this happens, all the money you managed to save by paying a high deductible would have been for naught. Additionally, your credit might also affect how much your premiums would be. For instance, in the event that your credit score drops just as you were renewing your insurance policy, your insurer might consider this a red flag and consider you a high-risk client, which in turn would lead to you paying higher premiums.

Do Your Homework

If you have an excellent credit score and can comfortably afford the cost of a higher insurance deductible, then a high deductible might be a sensible option for you. It is however still recommended that you do your homework and shop around for the best deal, and compare how much you could potentially save from paying a high deductible vs. playing a flat fee.