- September 9, 2020
- Category: Auto, Home, Tips & Advice
It’s important when choosing an insurance policy you think about more than just price. We’ve all seen the ads where insurance companies say “save 15% or more on your premiums.” If you think about it, how is that possible for all these companies? Sure, you could save some money by switching insurance companies, but there is more you should consider.
1. Higher deductibles
Some make the mistake of choosing a higher deductible to save money on their premiums. In the case of a claim, having a high deductible could have some serious financial consequences.
High Deductible
- Lower premiums
- Less coverage from your insurance company
Low Deductible
- Higher premiums
- More coverage from your insurance company
Let’s say your current policy has a $1,000 deductible, but another policy with a lower premium has a $2,000 deductible. In the case of a claim, you will have to pay an extra $1,000 out of pocket if you choose the policy with the lower premium. Is this something you can afford? If your answer is no, you’ll want a lower deductible.
2. Coverage
Insurance only pays for the insured losses outlined in your contract. For example, you could switch from a policy that offers replacement value coverage, to a policy that offers cash value coverage. This could save you money on your monthly premiums, but you may be paying up thousands of dollars out of pocket as a result of a claim.
Replacement Cost Insurance
- Pays for the full replacement cost of your items in case of damage or theft
- Higher premiums
Actual Cash Value Insurance
- You make up the difference between the depreciated value and replacement value in case of damage or theft
- Lower premiums
In some cases, it may be better to pay a higher premium each month than to get stuck in a nightmare scenario. Cheaper doesn’t always mean better.