Want to Raise Your Deductible? Get a Piggy Bank

In the old days, homeowner policies had flat-rate deductibles - $1, 000, for example - regardless of home value. In the 1990s, that began to change, and the norm became deductibles based on a percentage of the home's value. How does this work, and does it play into raising homeowners insurance deductibles?

Assume your home's value is $300,000. A 1 percent deductible equals $3,000, a 5 percent deductible, $15,000, and so on. As property values rise, some homeowners choose to raise the percentage and lower their premium.

However, this may be risky. If you do raise your deductible, you need to ensure you always have assets on hand (in a piggy bank or dedicated account) in case something happens.

Paying the deductible: Be aware that it's your responsibility to cover the deductible amount. So if a freak wind storm only slightly damages your property and you aren't able to pay the deductible out of your pocket, you may find yourself having to raid your piggy bank to pay the deductible or cover the damage yourself. Self Insuring those smaller damages helps keep your Premiums low Long term by avoiding submitting a claim.

Situational deductibles often apply in areas prone to earthquakes or hurricanes. Although percentage deductibles are mostly the norm, some policies still have flat-ate deductibles. Whichever is part of your policy, raising deductibles is still a great way to lower premiums.