We are evaluating a new home insurance policy, and have the option to select a higher deductible, ranging from $2.5K to $5K to $10K, with a corresponding reduction in premiums. As reference, our current deductible is $1K.
My thinking on this is that I likely wouldn't file a claim for anything less than $2.5K anyway, so that's a pretty easy decision. The same could be said for a $5K claim.
What have others decided?
adestefan Posts: 582 Joined: Fri Jan 06, 2017 7:22 pmPost by adestefan » Tue Aug 09, 2022 8:45 pm
I’m also currently at $1000. I’ll probably reassess it before my next renewal in 2023. It was set that way when I bought my first house 15 years ago. I would check if A higher deductible would make a difference every few years and it never did. With the way insurance rates are raising I’m not sure if that still true.
rjbraun Posts: 2385 Joined: Sun Sep 09, 2012 8:22 pmPost by rjbraun » Tue Aug 09, 2022 8:47 pm
$5000 deductible. When I looked at a higher deductible the premium reduction didn't seem worth it. I guess the premium was unattractive with a $2500 deductible. Also, I probably figured I would hesitate to file a claim for anything between $2500 and $5000.
ResearchMed Posts: 17297 Joined: Fri Dec 26, 2008 10:25 pmPost by ResearchMed » Tue Aug 09, 2022 9:37 pm
rjbraun wrote: ↑ Tue Aug 09, 2022 8:47 pm $5000 deductible. When I looked at a higher deductible the premium reduction didn't seem worth it. I guess the premium was unattractive with a $2500 deductible. Also, I probably figured I would hesitate to file a claim for anything between $2500 and $5000.
One problem we realized when we decided to up the deductible is that *whatever* the deductible, there's still the decision of "how much above the deductible" would it need to be to file a claim.
I mean, with $5k, if the loss is $5,100, as a silly example, it's not worth making a claim and possibly affecting the claims history, etc. But $6k? $6,100? $6,500? $7k? What's the cutoff, and that's an issue no matter what the deductible.
That seems to be sort of an odd situation, but that *is* the situation any time there is a decision. Something like $20k, well, sure.
So why not up the deductible to $10k? Same problems. just starting at a higher threshold.
Post by riverant » Tue Aug 09, 2022 9:48 pm
I find the premium savings isn’t really worth it to go above 2500. Thinking about it, claims for a given policy are really rare, excluding some weather claims in parts of the country. And if you’re already at a 2500 deductible, claims tend to be large (say over 5000). So while a higher deductible means severity is lower for the company, we’re talking a very low probability of them saving $2500. So you might get a $50 lower premium. While I can afford a 5k claim, it’ll annoy me a heck of a lot more than the value is place on saving $50 a year.
runner3081 Posts: 6211 Joined: Mon Aug 22, 2016 3:22 pmPost by runner3081 » Tue Aug 09, 2022 10:26 pm
feh Posts: 2135 Joined: Sat Dec 15, 2012 10:39 amPost by feh » Wed Aug 10, 2022 7:08 am
State laws come into play here. In my last state of residence, the max deductible was 1% of the home's value, which is what I set the policy to.
Mako Posts: 499 Joined: Wed Feb 28, 2007 8:34 amPost by Mako » Wed Aug 10, 2022 8:10 am
feh wrote: ↑ Wed Aug 10, 2022 7:08 am State laws come into play here. In my last state of residence, the max deductible was 1% of the home's value, which is what I set the policy to.
Also Fannie Mae allows a max of 5% of the face amount, so if you have a mortgage you likely have that limit. One should check their mortgage docs.
OP I did the same thing a year ago, moved from $1000 to $2500 following a short thread here. Didn't use insurance in the past year and sold the house, so I guess I won.
Nowizard Posts: 5058 Joined: Tue Oct 23, 2007 5:33 pmPost by Nowizard » Wed Aug 10, 2022 8:21 am
Ours is a percentage of the loss, not even sure whether it is 2 or 5% which reflects the choice of premium cost over concern for loss.
goingup Posts: 5002 Joined: Tue Jan 26, 2010 12:02 pmPost by goingup » Wed Aug 10, 2022 8:31 am
$5K. USAA on CA home. I will think about raising to $10K on renewal. Never had a claim in 26 years. michaeljc70 Posts: 11085 Joined: Thu Oct 15, 2015 3:53 pmPost by michaeljc70 » Wed Aug 10, 2022 8:39 am
$1000. That is the maximum per our HOA. mw1739 Posts: 1196 Joined: Mon Mar 21, 2011 5:44 pmPost by mw1739 » Wed Aug 10, 2022 8:44 am
$2500. It's been awhile since I had our agent check, but last I checked the premium savings didn't seem worth it to go beyond $2500 or $5000.
Topic Author LeftCoastIV Posts: 1030 Joined: Wed May 01, 2019 7:19 pmPost by LeftCoastIV » Wed Aug 10, 2022 9:51 am
Thanks all. In looking at the policy quotes, the biggest savings for us comes from moving from $2.5K to $5K deductible, which lowers the annual premium by $755. Moving to $10K only lowers by another $355.
CAsage Posts: 3900 Joined: Sun Mar 27, 2016 6:25 pmPost by CAsage » Wed Aug 10, 2022 10:01 am
I've never had a claim, basically I view HO insurance for total loss due to fire. I chose 10K because it lowered the "lost" premium, which over 30 years (and counting) will more than cover. Catastrophic loss only.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor. turtlebug Posts: 247 Joined: Sun May 15, 2022 10:46 amPost by turtlebug » Wed Aug 10, 2022 10:13 am
10K deductible with USAA. If allowed, I'd increase it to 15K. AerialWombat Posts: 3177 Joined: Tue May 29, 2018 1:07 pm Location: Cashtown, CashylvaniaPost by AerialWombat » Wed Aug 10, 2022 10:25 am
Last edited by AerialWombat on Thu Aug 25, 2022 5:10 pm, edited 1 time in total. This post is a work of fiction. Any similarity to real financial advice is purely coincidental. Outer Marker Posts: 4774 Joined: Sun Mar 08, 2009 8:01 amPost by Outer Marker » Wed Aug 10, 2022 10:33 am
$25,000. I plan never to file a claim unless the house burns down. I can afford to absorb a $25,000 loss (albeit painful) and don't believe in insuring anything I can afford to self-insure. It's a losers bet that always favors "the house." i.e. insurance company. You'll have smaller premiums, not have to hassle with third party reimbursement if you do have a loss, and your rates won't increase from making small claims (which are the whole point of having a low deductible).
discman017 Posts: 250 Joined: Mon Jan 28, 2008 12:07 pmPost by discman017 » Wed Aug 10, 2022 10:37 am
Outer Marker wrote: ↑ Wed Aug 10, 2022 10:33 am $25,000. I plan never to file a claim unless the house burns down. I can afford to absorb a $25,000 loss (albeit painful) and don't believe in insuring anything I can afford to self-insure. It's a losers bet that always favors "the house." i.e. insurance company. You'll have smaller premiums, not have to hassle with third party reimbursement if you do have a loss, and your rates won't increase from making small claims (which are the whole point of having a low deductible).
Well said. Max deductible with my current insurer is 2%. IIRC, going from the minimum $1K deductible to the 2% dropped my premium by about half.
I previously had a $50K deductible with Chubb. They have a unique policy where the deductible is waived on claims over $50K. So essentially, I couldn't claim any loss under $50K, but any loss over $50K was covered from the first dollar, with no deductible.
I buy homeowner's insurance to cover a catastrophic loss that would be financially devastating (i.e. total loss due to wildfire). For smaller issues that come up, I'll fix myself or pay out of pocket. Had a dishwasher leak a few years ago, for example, and might have paid $10K or more to have everything professionally fixed (flooring, drywall, etc.) but just did the work myself, paying $100 or so for materials.
It especially doesn't make sense to me when people have a $1K deductible and are reluctant to make a $5K claim because they're afraid it will raise their premium. If you're not even going to make a $5K claim, why pay extra for the low deductible?
Outer Marker Posts: 4774 Joined: Sun Mar 08, 2009 8:01 amPost by Outer Marker » Wed Aug 10, 2022 10:39 am
LeftCoastIV wrote: ↑ Wed Aug 10, 2022 9:51 am Thanks all. In looking at the policy quotes, the biggest savings for us comes from moving from $2.5K to $5K deductible, which lowers the annual premium by $755. Moving to $10K only lowers by another $355.
So, over 10 years, that $355 plus interest equals approximately $5,000 - or the entire amount of the lower deductible, which will then be in the insurance company's pocket, not yours. In 30+ years of home ownership, I have yet to file a home insurance claim. It adds up . . .
Broken Man 1999 Posts: 8831 Joined: Wed Apr 08, 2015 11:31 am Location: West coast of Florida, near Champa Bay !
Post by Broken Man 1999 » Wed Aug 10, 2022 10:48 am
Our deductible for everything except hurricane is $5,000. Hurricane deductible is $6,820.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain Tom_T Posts: 5236 Joined: Wed Aug 29, 2007 2:33 pmPost by Tom_T » Wed Aug 10, 2022 11:02 am
Happy this topic came along. I checked my coverage, and my deductible is $1,000. I called the insurance company, and they can go up to $2,500 max for a deductible. That will save me $260/year, so I went ahead with the change. Better than nothing. And, since my policy renewed four months ago, they will send a check for the prorated difference.
an_asker Posts: 4986 Joined: Thu Jun 27, 2013 2:15 pmPost by an_asker » Wed Aug 10, 2022 11:05 am
ResearchMed wrote: ↑ Tue Aug 09, 2022 9:37 pm [. ]
One problem we realized when we decided to up the deductible is that *whatever* the deductible, there's still the decision of "how much above the deductible" would it need to be to file a claim.
I mean, with $5k, if the loss is $5,100, as a silly example, it's not worth making a claim and possibly affecting the claims history, etc. But $6k? $6,100? $6,500? $7k? What's the cutoff, and that's an issue no matter what the deductible.
That seems to be sort of an odd situation, but that *is* the situation any time there is a decision. Something like $20k, well, sure.
So why not up the deductible to $10k? Same problems. just starting at a higher threshold.
Here is where the issue comes in. Let's say you have an issue and the estimate to fix it is $6,000. You start with the repairs and then find embedded issue #1.1 which is an additional $6,000 to fix.
I don't know how the insurance will react if you tell them that this is a $12,000 issue . and that you are already $6,000 in the hole which was not inspected and approved by their adjuster.
That really is the risk you would be really taking.
BolderBoy Posts: 6992 Joined: Wed Apr 07, 2010 12:16 pm Location: ColoradoPost by BolderBoy » Wed Aug 10, 2022 11:19 am
discman017 wrote: ↑ Wed Aug 10, 2022 10:37 am .
I previously had a $50K deductible with Chubb. They have a unique policy where the deductible is waived on claims over $50K. So essentially, I couldn't claim any loss under $50K, but any loss over $50K was covered from the first dollar, with no deductible.
I buy homeowner's insurance to cover a catastrophic loss that would be financially devastating (i.e. total loss due to wildfire). For smaller issues that come up, I'll fix myself or pay out of pocket.
I presently have Chubb and the $50k deductible. And I agree with your other sentiments as well. Nothing to do with premium cost reduction.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect SubPar Posts: 550 Joined: Mon Apr 27, 2020 11:48 amPost by SubPar » Wed Aug 10, 2022 11:58 am
$2,500 if memory serves me. I have a guaranteed replacement cost policy. chipperd Posts: 1674 Joined: Sat Sep 24, 2011 5:58 am Location: here and nowPost by chipperd » Wed Aug 10, 2022 12:25 pm
$2,500 with high level replacement cost.
Note: we reduced our cost of insurance by stepping down to the lowest level, the portion of the insurance that covers the contents of our home.
It seems the insurance company thought we were housing a couple Van Goughs.
Post by N.Y.Cab » Wed Aug 10, 2022 12:44 pm
Seems to recall not much savings beyond $1k deductible. This might be different in other area of the country so would reconsider when moving down to Florida.
quantAndHold Posts: 10262 Joined: Thu Sep 17, 2015 10:39 pm Location: West CoastPost by quantAndHold » Wed Aug 10, 2022 12:46 pm
I think it’s 1% of replacement cost on the house, and $1000 on the contents. The higher deductible saved us quite a bit. It was a few years ago, though, so I don’t remember exactly how much.
glashutte Posts: 32 Joined: Wed Aug 10, 2022 1:40 pmPost by glashutte » Wed Aug 10, 2022 4:27 pm
$500/ with USAA on 1M home.
It came in handy when things like roof or costly items have to be replaced. I don't want to be 'afraid' to make a claim if it costs $5k or 1%..
My car deductible is $100/claim which has came in handy several times
I think the premium difference was maybe $100/month? I don't recall exactly, so I do not have the exact numbers to compare pros vs cons.
rjbraun Posts: 2385 Joined: Sun Sep 09, 2012 8:22 pmPost by rjbraun » Wed Aug 10, 2022 8:23 pm
ResearchMed wrote: ↑ Tue Aug 09, 2022 9:37 pmrjbraun wrote: ↑ Tue Aug 09, 2022 8:47 pm $5000 deductible. When I looked at a higher deductible the premium reduction didn't seem worth it. I guess the premium was unattractive with a $2500 deductible. Also, I probably figured I would hesitate to file a claim for anything between $2500 and $5000.
One problem we realized when we decided to up the deductible is that *whatever* the deductible, there's still the decision of "how much above the deductible" would it need to be to file a claim.
I mean, with $5k, if the loss is $5,100, as a silly example, it's not worth making a claim and possibly affecting the claims history, etc. But $6k? $6,100? $6,500? $7k? What's the cutoff, and that's an issue no matter what the deductible.
That seems to be sort of an odd situation, but that *is* the situation any time there is a decision. Something like $20k, well, sure.
So why not up the deductible to $10k? Same problems. just starting at a higher threshold.
Fair point. While I don't recall the premiums, I guess the savings for deductibles of $7500 or even $10,000 (if I checked) didn't seem attractive enough to me to switch. So, in other words I wanted to have the option to file a claim for over $5000. It doesn't mean that I necessarily would, but I wasn't willing to forego that possibility just to save the premium differential, if you follow.
I've never filed a claim, though I feel as if I have paid Chubb plenty over the years. I know, one should be happy their home didn't burn down. It just stings to receive non-trivial premium hikes each year. Admittedly, I did get a reduction one year, but that feels like ancient history now.
I just keep reminding myself that the policy is intended to make the prospect of being displaced (homeless) a bit more bearable by, I hope, not having to deal with "nickel and diming" on claims. Untested, so far, but hoping that Chubb will live up to my perception / understanding of their reputation.
MikeG62 Posts: 5204 Joined: Tue Nov 15, 2016 2:20 pm Location: New JerseyPost by MikeG62 » Thu Aug 11, 2022 10:18 am
LeftCoastIV wrote: ↑ Tue Aug 09, 2022 8:35 pm We are evaluating a new home insurance policy, and have the option to select a higher deductible, ranging from $2.5K to $5K to $10K, with a corresponding reduction in premiums. As reference, our current deductible is $1K.
My thinking on this is that I likely wouldn't file a claim for anything less than $2.5K anyway, so that's a pretty easy decision. The same could be said for a $5K claim.
What have others decided?
Here is how premiums change for increasing the deductible on our homeowners insurance policy.
Deductible levels offered range from $500 to $10,000. The premium reduction for increasing the deductible would be as follows:
$500 to $1,000 = -$160 (I am at $1,000 currently)
$1,000 to $1,500 = -$90
$1,500 to $2,000 = -$65
$2,000 to $2,500 = -$60
$2,500 to $5,000 = -$130 (or $26 for each $500 increment)
$5,000 to $10,000 = -$140 (or $14 for each $500 increment)
The benefit from each successive $500 increase gets smaller and smaller.
We are currently at $1,000, but had an issue recently where we spent $1,500 to repair damage from a broken pipe in our basement. We ate the costs as I decided going through insurance for a claim at this level was not worth it.
Documented the thought process in this thread.
I should probably increase it to $2,500, but the savings is so small ($215) I haven't gotten around to it. On the one hand, we should not have it at $1,000 (as I know I am not going to submit a claim for $1,500 or even $2,000). On the other, if we had a large claim (say $5,000 or more) where we would file, having the costs covered beginning at $1,001 has some appeal.