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Avoid This Common and Costly Insurance Mistake

June 11, 2015 at 12:00 AM

If you have a low deductible of just $250 or $500 on your homeowner or car insurance policies I want you to listen up right now.

You need to call up your insurer and ask for a higher deductible. Yes, I said higher.

I know it seems tempting to choose a lower deductible. But lower deductibles can actually end up costing you plenty. That’s because when you have a lower deductible chances are you will be more prone to file small claims.

And that will annoy your insurance company. So when your policy comes up for renewal you will probably be presented with two unpleasant realities: Your annual premium cost will be raised, or in some instances you may be told that the insurer is not going to renew your policy. Yep, they can fire you. And when you shop for insurance from another company you better understand that they will be able to access your records of making small claims, and will take that into consideration when evaluating you as a potential client.

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You can avoid all this by raising your deductibles to $1,500 or more. That reduces the temptation to file small claims. And some good news is that when you raise your deductible, your annual premium will be lower than if you have a low deductible.

Now to state the obvious, before you do this you have to make sure that you have enough money in your emergency savings fund to cover the higher deductible. The last thing I ever want is for you to “cover” small damage costs by putting them on a credit card you can’t pay off immediately.

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