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ALWAYS CHOOSE THE HIGHEST DEDUCTIBLE FOR HOME AND AUTOMOBILE INSURANCE

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While you hope you never need to use it, you must have insurance in both of these areas. Without
home or auto insurance, you could lose everything you have (and more). You just need to make sure
you don’t pay high premiums (payments). The best way to manage this is to protect yourself against
worst-case (or catastrophic) situations.
First, let’s make sure you understand what a deductible is. A deductible is the amount of money that
the insured party must pay before the insurance company starts reimbursing the insured for losses.
Insurance companies include a deductible in their policies to avoid paying out benefits on relatively
small claims.
An example should help you understand this better. If you were in an auto accident that caused $3,000
in damages and your deductible was $500, then your insurance company would reimburse you for
$2,500 of the loss.
The higher your deductible, the lower your insurance premium. Thus, it makes no sense to report
minor damages to your insurance company. Once the deductible is fulfilled, you will get reimbursed
for the rest of the damages. However, your future insurance premiums will often increase to more than
offset the reimbursement you received for damages.
If you consistently claim insurance losses, you will be deemed a high-risk individual. This will result
in either significantly increased costs for insurance or refusal by insurance companies to insure you.
Let’s recap:
1. You need both home and auto insurance.
2. Purchase insurance that has the highest deductible for auto and home (usually at least
$1,000).
3. Claim insurance for only catastrophic (high-value) occurrences.

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