Should You Raise Your Deductibles?

There is a distinct appeal in having a reduced insurance premium. After all, with a lower premium you can still bask in the protectiveness of your policy but spend less each month for the pleasure of doing so. But, there may be a price to pay for that lowered premium—especially if you've raised your deductibles to get it.

What Is a Deductible?

Deductibles are the initial out-of-pocket amount that you must pay after an insurable incident. If the damage from an insurable incident is equal to or less than your deductible, then your insurance company may pay nothing. In some cases, the deductible is cumulative and once you have met it for the year, the insurance company will begin paying claims in full after the next incident. In other cases, such as with auto insurance, the deductible is per incident so no matter how many instances you have each year you must pay that deductible each time.

What a Deductible Means to You

At their very core, deductibles mean cash out of your pocket in the event of an insurable incident. While this is certainly reasonable, it's also quite a bit of a gamble. Not only is it a gamble in the respect that you'll need to have the cash available when an incident occurs, but it's also a gamble in that you may find that one insurable incident, such as a hurricane, results in damages to several different assets—each with their own insurance policy and deductible.

For example, let's say that there is a tropical storm that causes damage to your car, your spouse’s car, and your teenage son's car. It also tears down your fence, destroys your shed, collapses the roof on your porch and results in the flooding of a local lake that ends up soaking the entire first floor of your home. Not only would this incident result in claims being sent to your auto insurance company, your home insurance company and your flood insurance company, but you could have up to five deductibles pay. You could have one for each vehicle that was affected, one for your Miami home insurance policy, and one for your flood insurance policy.

The deductibles that you have should never be more than you can afford to pay. If you aren't certain how to evaluate the affordability of your deductibles in light of a real disaster, stop by or give us a call and allow us to help you determine their practicality.