Should You Raise Your Insurance Deductibles? Pros and Cons

Should You Raise Your Insurance Deductibles? Pros and Cons

The insurance industry is turbulent and ever-changing at best. In fact, what might be trendy today may be obsolete tomorrow. One constant remains in the insurance industry, however; raising your insurance deductibles can lower your monthly premiums. Whether for health, car or even life insurance, this unofficial law is still in place across the industry as a whole. Still, with smaller and more affordable monthly payments – your deductibles are sure to be bigger .Similarly, how much can you truly save on monthly payments when you still have to meet a larger deductible?

With this in mind, are some benefits of raising your insurance deductibles:

Save Money on Monthly Payments

As mentioned above, the main reason to increase deductibles is to secure cost-effective monthly payments. This enables you to have better cash flow each month for other bills and expenses. For example: you may be paying $100.00 per month on a $1,000 insurance deductible. Taking out a $2,000 deductible may lower your monthly payments by 50 percent. However, it’s important to know that with any large or small deductible –it must be paid out fully in order for the insurance to kick in.

Save Money to Meet Deductible

By taking out a larger deductible, you can save money each month – which can be used to pay the deductible in whole. Remember, there usually no restrictions or penalties in meeting your deductible via traditional payments. Sadly, most people tend to meet their deductibles due to extensive hospital stays and/or emergency room treatments. Depending on your medical insurance carrier, you should be able to “ pay ahead” without any real monthly restriction. Still, it’s best to consult with your insurance company to see what type of options they offer. It’s also important to know that once your yearly deductible has been, you may quality for even lower monthly payments and higher deductible plans.

Disadvantages of Higher Deductibles

The disadvantage of taking out a higher deductible is the deductible itself. For example: you may be paying lower monthly payments on a $6,000 deductible. However, you will have to pay off the full deductible before the insurance is fully active. With this in mind, suppose you do not have to go to the hospital or ER within a full insurance year? This means you have essentially wasted monthly payments just to keep your insurance policy active. According to industry experts, the solution is to find a 50/50 insurance plan for policy. This allows your plan to “kick in” once 50 percent of the deductible is met, and you will still have cost-effective monthly payments as well.