April 16, 2010, Newsletter Issue #50: Deductible Vs. Premium

Tip of the Week

Your deductible is the amount that you agree to pay out of pocket whenever you file a claim with your homeowner’s insurance provider. The higher your deductible is, the lower your monthly premiums will most likely be. The opposite also holds true.

This is something that you negotiate with your insurance company when you purchase a policy. Your deductible could be $250, $1,000 or just about any other figure. So if there is $10,000 worth of damage done to your home and your deductible is $1,000 you are only paying 10 percent of the total cost out of pocket. Your insurance company pays the rest.

When finalizing your policy, you need to figure out how much you can afford to pay in monthly premiums, then decide if you would like a higher or lower deductible. Usually this comes down to your month-to-month finances and what you are more comfortable with. So if you are looking to limit your monthly bills, a higher deductible is one way save on home insurance each month.

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