When Should You Increase Insurance Deductibles?

Print Friendly

Insurance is your financial defense.

Insurance is not an optional component of a good financial plan because if you cut this corner, you expose yourself to too much risk.  In fact, not having an appropriate amount of insurance can cause serious financial damage.

However, one way to minimize the insurance pinch is to consider increasing your insurance deductibles.

Insurance Deductible Quick Review

The deductible is the portion of your insurance that you are required to pay when there is a claim.  For example, if your car coverage has a $500 deductible, that means you will pay the first $500 if there is a claim.

The Insurance Deductible and Premiums Teeter Totter

There is always a parallel relationship between deductibles and premiums.

The higher the deductible, the the lower the premium. The lower the deductible, the higher the premium.  You cannot have your cake and eat it too.

When one goes up, the other must come down.

To illustrate, I went to eHealthInsurance (affiliate link).  Before buying international health insurance, I had purchased my last policy through eHealthHnsurance.  I entered my actual family information and selected Blue Cross Blue Shield (I used to have BCBS health insurance) for their PPO Select Plan Saver IV (not a recommendation, but a selection).

Using that example, I got the following results:

Deductible $2,500 = Premium $377 monthly

Deductible $5,000 = Premium $290 monthly

By increasing my deductible by $2,500 annually, I could save $87.00 per month or $1044 per year.  That would be a great idea, as long as you are in a financial position to be able to increase your deductible.

Should You Increase Your Insurance Deductible?

The following questions can apply to all sorts of coverage: health, auto, renters, and home insurance.  How you answer the question impacts if you should increase your insurance deductible.

Question #1: Are you low risk?

For health coverage, ask yourself: is my family relatively healthy?  If yes, you are low risk.

In my case, other than medical bills when my wife has had a baby, we have never even come close to our deductible in the last 10 years.

If you are applying for health insurance, review your records over the last five years.  If you have not reached your deductible 3 out of 5 years, you could probably consider increasing your insurance deductible.  More often than that, and it might not make financial sense.

If you are talking about auto coverage and you have a teenager whom you do not trust, you might need to keep a higher deductible. And don’t forget to pray.

Question #2: Are you and your children responsible?

Insurance money is not a waste of money.  Nor is insurance a way to get rich quick.  It is simply a way to be sure you are financially progressing.  Insurance allows you to move forward without the risk of sliding backwards.

When you increase your insurance deductibles, in some ways you do increase your risk.  As such, be sure that, for example, teens in the house understand the importance of safe driving.

If you are a responsible person, it will be reflected in your insurance.  Non-smokers pay less for life insurance.  Teens with better grades pay less for auto insurance.  Adults with better FICO scores pay less for insurance.

Question #3: Do you have double your highest deductible in an emergency fund?

Let’s say you’re thinking about increasing your health insurance to a $5,000 deductible.  In this case, you would need to be sure you have at least $10,000 in an emergency fund.

Should it be double the sum of all your insurance deductibles?

No, I don’t think so.  I’m assuming you won’t reach your deductible on your auto insurance, house insurance, and health insurance all in the same year.

For this reason, if you are in good financial shape and you double your highest deductible, you can cover it from your emergency fund.

Note: Technically, for a family you might have a total payout limit of $15,000, (deductible of three family members) so you should have at least $30,000 in an emergency fund.  However, the likelihood (if healthy) of three family members all reaching their deductible in the same year is quite slim.  As a result, use the double a single deductible as a guide.

Special note to those in debt:

Those in debt will need to do a little extra math here.  Most likely, you will be better off keeping a minimal emergency fund, regular deductibles, and paying off your debt.  However, if your insurance savings are dramatic enough, you could consider putting your debt repayment on hold while you built up an emergency fund so that you could increase insurance deductibles.

Since your case is fact dependent, you will need to run your own numbers on this one, but I think you will be better off focusing on your debt.

Keep your emergency fund in an account without risk.

Since your emergency fund now has a backup insurance role, you need to be extra sure that these funds are safe.  Just realize the return you are getting on these funds is as much what they are saving you in premiums as what you are getting in interest.  Currently, high yield savings accounts are getting (on average) about 5x money market accounts, so I would suggest a high yield savings account like ING Direct.


  1. says

    If kids are not stopped at a young age, they may get
    addicted to pornography. At first one of the most
    erotic scenes merely contained brief point in time of a woman performing
    a striptease or disrobing on several moments however they ended up immediately labeled as
    being obscene and taken illegal. With the development of new technological innovations, contemporary roofing systems with energy efficient features have been in trend now.

  2. says

    When you are still going to play following this review,
    then the following tips can assist you improvement in the
    status hierarchy a small bit faster, even benefit from the game a little bit more:
    . Earning over $1 billion in revenue in just 3 days of availability, that would mean that game has potentially
    achieved sales around the 15 million worldwide. She then humiliates the potential husbands on the archery

  3. says

    Witaj! To blogu może nie! Czytając to artykuł przypomina mi mojego poprzedniego współlokatora!
    On ciągle mówisz trzymane to. mam zamiar naprzód ten post do niego.
    Całkiem pewna on będzie mieć dobry czytać. Dzięki za dzielenie!

  4. says

    For example, most exercises used in stretching the
    ligaments of the apple retail store penis focus
    on the condominim market. Hiring a professional to apple retail store assist
    with the installation of this nature depend on huge loans and mortgages.
    And, in fact, protects the body surfaces from pathogens.

  5. says

    Had been actually searching for just a typical shower enclosures during
    which I stubled onto this fabulous site, did not
    even know there was any such thing as a ‘steam shower enclosure’, wow, may just have to get one

  6. says

    Greetings from Colorado! I’m bored to death at work so I decided to check out your website
    on my iphone during lunch break. I really like the knowledge you
    provide here and can’t wait to take a look when I get home.
    I’m shocked at how fast your blog loaded on my phone .. I’m not even using WIFI, just 3G ..
    Anyhow, very good site!

  7. says

    It’s a pity you don’t have a donate button! I’d
    certainly donate to this superb blog! I guess for now i’ll settle for book-marking and adding your RSS feed to my Google account.
    I look forward to brand new updates and will talk about this website with my Facebook group.
    Talk soon!

  8. says

    While sleeping on your belly your arms rarely lie flat down to your side.
    Marijuana, for example, is a drug that relaxes the body.
    ‘ Mouth Exercises: There are a few “exercises that tend to strengthen to muscles of throat and mouth” along with unclenching the jaw that can help the snorers.

  9. says

    At present the group is enhancing the living of residents of Pune by launching Megapolis Smart Homes 2.
    There can be a beer river in Germany, using a city sitting on its sausage banks.
    In economic terms, they have lost the method of production. There is lesser pollution, the planet are good to reside and therefore
    the most crucial issue that there are safety and security.
    within the apartment complex so that you can unwind in style.
    Somebody may well believe comment tricher sur megapolis might be a undesirable subject that you can guide
    some kind of marketing strategy using, in simple fact while using
    interpersonal in addition to environment impact could be features, this subject was capable to attain lots of fans.

    Pegasus Properties is started by experienced marketing professionals having rich
    experience of real estate property sector.

  10. says

    Excellent blog! Do you have any hints for aspiring
    writers? I’m planning to start my own blog soon but I’m a little lost on everything.
    Would you advise starting with a free platform like WordPress or go
    for a paid option? There are so many options
    out there that I’m completely confused .. Any ideas?

  11. says

    David Duncan is the owner of Du – Lando Screen & Awning,
    Inc. Though the ticket packets were a bit awkward to deal with, I
    found the icons charming. Ascend the Rune pillar using the metal cage or pillar ledges and then leap from the
    top of this pillar to the higher pillar in front.

  12. says

    hello!,I love your writing so so much! share we be in contact extra about your article on AOL?
    I require a specialist on this space to unravel my problem.
    May be that’s you! Looking ahead to see you.

  13. says

    I’ve been surfing online morre than three hours today, yet
    I by no means found any interesting article like
    yours. It is lokvely value enough for me. In myy view,
    if all website owners and bloggers made good content as youu did, the nett shall be
    a lott more useful than ever before.

  14. says

    Hi to all, how is everything, I think every one is getting more from this web
    page, and your views are fastidious in support of new people.

Leave a Reply

Your email address will not be published. Required fields are marked *