When on the market for home or automobile insurance, what do you look for? Please don't tell us you just want the cheapest possible option. We don't like to hear that. Here's why:
Insurance is meant to transfer financial risk away from you when something bad occurs. So if you ever
need to make a claim, you know that the insurance will cover: some, most, or all of the damage. That
way, you can continue on with your life mostly unaffected, even if something happens. If you only look
at the cheapest price without ensuring that you have proper coverage levels, you’ll likely find yourself in
store for some unpleasant surprises if you need to make a claim.
Now, pretend that you selected a plan with great coverage...
But your broker is still offering you two or three rates. The only noticeable difference between the plans
is the deductible. Can you pick the cheapest plan then? It depends.
WAIT—What's a deductible again?
A “deductible” refers to the amount that you
must pay out-of-pocket before an insurance
company will pay the remaining amount.
Deductibles help insurance companies prevent
small or frivolous claims. Plans that come with a
higher deductible usually have lower premiums.
But if you pick an amount that you do not readily
have set aside, then you will experience financial
strain trying to scrounge up the deductible, before
you can access the rest of your policy. You also
have to factor in how likely it is that you will need
to make a claim.
When it comes to auto insurance...
The truth is that your likelihood of getting into an
accident is always the same. So, if your car is
relatively new, we suggest that you pick the
lowest deductible—typically $500. This will
minimize the amount you pay out-of-pocket if your
car is totalled.
When it comes to home insurance...
Homeowners typically need to make a claim once
every nine years. In this case, it may be a good idea
to pick a higher deductible because it will lower
your premiums significantly.
But be warned: you never want to pick a deductible that is more than you can comfortably afford. This
would completely defeat the purpose of buying insurance in the first place—to transfer financial risk and
strain away from you!
Ultimately, you need a home and auto insurance policy that takes your risk profile, your coverage needs
and your budget into account. We can help with that. PROLINK’s dedicated advisors will take the time to
fully understand your unique circumstances and help you make insurance decisions that are relevant and simple.