Our home policy renewed with a 9 percent increase and no change in coverage. Before shopping around, we asked the agent for a simple thing: the same policy, priced at three different deductibles. It turned out to be the most useful ten minutes we have spent on insurance, because the premium differences were far bigger than we had assumed.
The three quotes
| Deductible | Annual premium | Change |
|---|---|---|
| $1,000 (what we had) | $1,890 | — |
| $2,500 | $1,475 | −22% |
| $5,000 | $1,360 | −28% |
Moving from $1,000 to $2,500 saved $415 a year. Going all the way to $5,000 saved another $115, which was not worth it: a $5,000 hit would have wiped out most of our emergency fund in one bad storm, and the extra saving was small.
The rule we used
Only raise the deductible to a number that already sits in savings, separate from the emergency fund. If you could not write the check tomorrow without borrowing, the deductible is too high, no matter how good the premium looks. A deductible you cannot pay is not a deductible; it is a gap in coverage.
Then put the premium savings into that same account until it holds the deductible twice. For us that meant $415 a year going into a bucket labeled "house deductible" until it reached $5,000. After that the saving is real money.
Why the math works
Insurers price small claims expensively because small claims are expensive for them to handle and because people who file them tend to file more. By taking the first $2,500 of any loss yourself, you are telling the company you will not be calling about a broken window, and they price that in. Most homeowners go years without a claim, so the premium saving compounds while the deductible sits unused.
There is a second, quieter benefit. Filing small claims raises your premium for years afterward. With a higher deductible, you are never tempted to file for the $1,800 fence repair, and your claims history stays clean.
Things to check before you change it
- Wind and hail deductibles. In many states these are separate from the main deductible and often expressed as a percentage of the home's insured value. A 2 percent wind deductible on a $350,000 house is $7,000. Know which one you are changing.
- Your mortgage company's limits. Some lenders cap the deductible they will accept. Ours allowed up to $5,000; some are lower.
- Whether the discount is real. Ask for the actual premium at each level rather than a percentage. One company we asked quoted a deductible change that saved almost nothing, because their pricing was built differently.
What we did next
With the deductible settled, we then shopped the policy at three other companies at the same $2,500 level. One came in $140 cheaper, but with weaker replacement-cost terms on the roof, so we stayed. The point of raising the deductible first is that it makes the shopping comparison honest: every quote is for the same risk.
Two years on, no claims, $830 saved, and the deductible bucket is full. We will look at $5,000 again when it holds twice that.
