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Ways to Save With Your Deductible

I recently went to go see “The Greatest Showman,” as one who is often found singing or whistling show tunes, I loved it. But the sound track is probably better than the Movie. A great mix of music with strong beats and base lines and violins coupled with distorted guitar, and great melodies. Followed by hopefully ballads. Anyway, there is a song that talks about the long-lasting idiom, “Walking a Tight Rope.” What does this have to do with Saving money on your insurance? Anymore Insurance companies know about your home or auto by running reports. They know if you have had losses, they know when your home was built, what materials, the size, etc., etc., etc. They know. So, there isn’t a lot of wiggle room on a lot. But there is when it comes to deductibles, but it’s a tight rope walk.

When you have a covered claim the insurance company will pay the amount of the loss, less the deductible.

So for example, if you have a $1,000 deductible on your auto, and have a fender bender that costs $2,000 to repair the insurance company will pay $1,000, it is your responsibility to pay the rest of the amount due to the auto repair shop.

On a home if you have $1,000 deductible, and a hail loss that requires you to replace your roof, if the cost is $10,000 to replace the roof, then you would be paid $9,000 and you would be responsible for paying the contractor the other $1,000.

So how is this a type rope? There is a inverse relationship between the cost of your insurance policy and your deductible. The higher the deductible the lower your rates. The lower your deductible the higher your rates.

So how is this a tight rope? Well, on one hand if you have a BIG loss you won’t want to be coming out of pocket to pay a large amount of the claim. On the other hand, if you have a small loss will you actually turn it into the company? Think about it, if it’s a $1,500 loss and you have a $1,000 deductible. The additional $500 dollars you get from the insurance company will cost you dearly once you lose your claims free discount. So what should your deductible be? That depends? Do you have cash on hand usually? Do you have the ability to cover small losses yourself? If so, then the answer is higher.

Once quick example to close. I recently helped a real estate investor get an insurance policy on a Manufactured Home he had purchased as a rental. As an investor he has cash on hand on a regular basis, and he knew the only time they would ever report a claim is if it was BIG. So we looked at the deductible. At a $1,000 deductible the rate was $1080 annually for this manufactured home. With a $2,500 deductible the rate was $817. With a $5,000 deductible the rate was $349. Wow! A 70% discount because of the deductible. Now he knows if there’s a loss he is probably covering it, but what he is most concerned about is a catastrophe, so he decided to go with a high deductible. But now you see, choosing your deductible is like walking a tight rope.

For questions on how to save money on your insurance policy, contact Gila Insurance Group. We’ll review your current policy or provide an insurance quote.