Increasing your renters insurance deductible can be an effective way to lower your premium. However, it’s important to understand the implications and make sure it’s the right move for your financial situation. Here’s how you can increase your deductible to save on premiums:
1. Understand the Deductible
- What It Is: The deductible is the amount you must pay out of pocket before your insurance policy starts paying for a claim. For example, if your deductible is £200, and you make a claim for £1,000, you’ll pay £200, and your insurer will pay the remaining £800.
- How It Affects Premiums: The higher the deductible, the lower your monthly premium. This is because you’re taking on more financial responsibility in the event of a claim, so the insurer’s risk is reduced.
2. Determine the Right Deductible for You
- Assess Your Finances: Before increasing your deductible, ensure you can afford the higher out-of-pocket cost if you need to make a claim. Consider how much you could comfortably pay without straining your finances in the event of an emergency or loss.
- Find the Balance: A deductible that’s too high could be risky if you need to file a claim, while a low deductible means you’ll pay higher premiums. Most renters choose a deductible between £100 and £500, but some insurers may allow you to increase it to £1,000 or more.
3. Contact Your Insurer or Use Online Tools
- Contact Your Insurance Provider: Reach out to your insurer and ask them how much your premium will decrease if you raise your deductible. Some providers may allow you to adjust your deductible directly through their website or mobile app, while others may require you to speak with an agent.
- Use Online Quote Tools: Many insurance companies have online tools where you can adjust your deductible and instantly see how it affects your premium. This is a quick way to compare different deductible options and choose the one that offers the best savings.
4. Consider the Impact of Claims
- Weigh the Risk of Small Claims: If you rarely make claims or only have a few small incidents, a higher deductible might make sense since you’re unlikely to need to claim frequently. However, if you live in an area prone to risks like flooding, theft, or fire, you might want to reconsider increasing the deductible too much.
- Avoid Filing Small Claims: With a higher deductible, you’ll likely avoid filing small claims since the amount you pay out-of-pocket will be close to or exceed the claim amount. This can be a good strategy to keep your premiums lower in the long run, as multiple claims can raise your premiums over time.
5. Look for Additional Ways to Save
- Combine Policies: If you have auto insurance or other policies with the same insurer, bundling them can result in further premium reductions, even with a higher deductible on your renters insurance.
- Implement Safety Measures: If you haven’t already, installing security systems or fire alarms can potentially lower your premium, reducing the impact of increasing your deductible. Check with your insurer for available discounts.
6. Monitor and Review Your Policy Annually
- Reevaluate Your Deductible Regularly: Once you’ve increased your deductible, it’s a good idea to review your policy annually to ensure it still fits your needs. As your situation changes (e.g., acquiring new belongings or increasing your savings), you may want to adjust your deductible again.
- Shop Around for Better Deals: If you’ve had your renters insurance for a while, consider comparing quotes from different providers. Switching insurers or renegotiating your deductible could result in additional savings.
Pros and Cons of Increasing Your Deductible:
Pros:
- Lower Premiums: A higher deductible can reduce your monthly premium, freeing up money for other expenses.
- Less Likely to File Small Claims: You’ll likely avoid filing minor claims due to the higher deductible, which could help you maintain a clean claims record.
Cons:
- Higher Out-of-Pocket Costs: If you do need to make a claim, you’ll pay more upfront before your insurance kicks in.
- Riskier in Case of Major Loss: If your possessions are worth a lot or you live in a high-risk area, a higher deductible could become a financial burden if a major claim arises.
Example:
Let’s say your current deductible is £200, and your monthly premium is £10. If you increase your deductible to £500, your premium might drop to £7.50. This means you save £2.50 per month, or £30 per year. However, if you do need to make a claim, you’ll pay an additional £300 out of pocket before your insurer contributes. You need to weigh whether the savings make sense for your budget and risk tolerance.
By carefully evaluating your financial situation and speaking to your insurer about your options, you can increase your deductible strategically to lower your renters insurance premium without taking on too much risk.
