Should I Have High Deductibles?


Your home insurance renewal arrives and like most people, you toss it in a drawer or cabinet once you have paid the bill, but you really don’t pay much attention to that stack of paperwork that comes in the envelope.

I get it. Most people don’t enjoy reading insurance policies. Therefore, it may surprise you to know that California courts have determined that it is the client’s responsibility to know the coverage in their policy, and to ask their agent questions if they don’t understand it.

With almost 30 years of experience as an insurance agent in Northern California, I can tell you that as an agency that believes strongly in educating our clients, we hear time and again that clients didn’t realize they had such a high deductible, until the claim occurred, and they were stuck paying much more than they anticipated.

The largest insurance company in the nation renewed home insurance policies many years ago with deductibles that they ‘automatically’ doubled. Did they call their clients to inform them, or send neon flyers in the policies to call their attention to the fact that their previous deductible of $500 was now $1,000; or $1,000 was now $2,000? No. Instead, clients found out when they had a claim, or when another agent was quoting their coverage and informed them.

We are now seeing some companies that have instituted a percentage deductible instead of a flat dollar amount. What this means is that their previous $1,000 flat deductible on their $250,000 insured value home, with a 1% deductible, is now increased to $2,500. It’s easy to do the math and see why clients who did see this happen on their renewals who had homes insured for much higher values, began calling around to get quotes on their insurance.

The higher insured value of your home, the higher your deductible with these percentage policies, and it’s a deductible that will increase ‘every year’ when your dwelling value is automatically increased to keep up with the inflation index.

As an LIC (Licensed Insurance Counselor) for over 10 years, I review insurance policies for the clients of local professionals, and I am amazed how many high value homes have the percentage deductible, but with a client who wasn’t aware of it. We were fortunate to assist a new client not only with better coverage, higher liability and a flat $1,000 deductibles vs the $4,875 (1/2%) deductible they had on their policy, but also afforded them a savings of well over $700 per year just on their home insurance premium.

I would highly recommend that when that large envelope comes from your insurance company, that you take a moment to review the policy itself and that you contact your agent with any questions you may have. Should you want a second opinion on your coverage or have an independent agent price your insurance with several carriers, we are simply a visit, phone call or email away.