Higher deductibles
When was the last time you reviewed your insurance deductible?
Affluent individuals insured by mass-market carriers are often paying for more insurance than they need because their deductible is too low. If you selected a low deductible on your home or auto insurance policy and haven’t been increasing it to match your current financial standing, you are likely overinsuring against minor losses. Think of your insurance as a tool to financially mitigate a catastrophic or significant loss to your home.
If you answer yes to any of the following, then you might be paying too much for your insurance.
- Have you had the same home and auto policy deductibles for years?
- If you suffered a loss today, would you be able to pay your deductible without financial hardship?
- If you had a minor loss, would you consider covering the cost without filing a claim?
- Are you concerned about your premiums increasing due to claiming a minor loss?
- If your deductible could be waived on home losses over $50,000, would you consider increasing it?
Experts suggest selecting the highest deductible that you are comfortable paying on a loss without significantly impacting your lifestyle. Increasing your deductible by one level can provide savings that will outweigh potential costs over time. According to the Insurance Information Institute, less than 7% of insured homes have a claim each year.1 By increasing your deductible on your homeowners insurance, it’s quite possible that, within a few years, the savings on the insurance policy would be greater than the difference in the deductibles. This savings will be even greater in future claim-free years.
Most financial professionals recommend that your liability limits at least equal your net worth. The savings from raising your deductible can offset the additional premium from increasing your liability coverage.
How you may benefit from increasing your deductible
Imagine the following scenario
You and your spouse own a $2.5 million home and carry a $2,500 deductible. You also have three cars and your only child turns 16 this year. You’re concerned whether your $2 million umbrella limits will be sufficient with a young driver in your family. With a Private Client homeowners policy, moving up one deductible level could save approximately 15% to 21%, or several thousand dollars over a few years.2 That would cover the cost to increase your liability limits to $5 million to more adequately protect your net worth.
The following table highlights potential premium savings based on a sample Private Client homeowners policy.2
| Dwelling value (coverage A) | Deductible change | Savings | Cumulative premium savings | ||||
|---|---|---|---|---|---|---|---|
| 1 year | 3 years | 5 years | 10 years | 15 years | |||
| $1 million | From $1,000 to $2,500 | 15% | $500 | $1,500 | $2,500 | $5,000 | $7,500 |
| From $1,000 to $5,000 | 27% | $900 | $2,700 | $4,500 | $9,000 | $13,500 | |
| $2.5 million | From $2,500 to $5,000 | 16% | $1,100 | $3,300 | $5,500 | $11,000 | $16,500 |
| From $5,000 to $10,000 | 17% | $1,000 | $3,000 | $5,000 | $10,000 | $15,000 | |
| From $10,000 to $25,000 | 21% | $1,000 | $3,000 | $5,000 | $10,000 | $15,000 | |
| $5 million | From $5,000 to $10,000 | 20% | $2,300 | $6,900 | $11,500 | $23,000 | $34,500 |
| From $10,000 to $25,000 | 21% | $1,900 | $5,700 | $9,500 | $19,000 | $28,500 | |
How Nationwide Private Client responds
With a Nationwide Private Client homeowners policy with protection endorsement, we will waive your deductible for a covered loss over $50,000. For example, if you have a covered loss totaling $100,000 with a $25,000 deductible, we will waive the deductible.3
Why it’s important for you
If you have been insured with a mass-market/standard insurance company for several years, you may be carrying a deductible that is too low for your financial situation. Ask your independent agent to provide you with a Nationwide Private Client homeowners quote with several deductible options. Consider utilizing this savings from selecting a higher deductible and take the opportunity to increase your liability limits. The same logic holds true for your automobile policy. We recommend consulting your independent agent regularly, especially as your financial position evolves.
Nationwide Private Client offers these added benefits:
- Specialized claims service: Our team of problem-solvers is available 24 hours a day, 365 days a year.
[1] "Facts + Statistics: Homeowners and renters insurance," iii.org/fact-statistic/homeowners-and-renters-insurance (accessed June 12, 2022).
[2] This example has been provided for demonstrative purposes. Your specific premium savings will vary depending on your specific home characteristics, location and insurance needs.
[3] This provision is valid unless a special deductible applies. In California, this provision does not apply if cause of loss is wildfire or brush fire. In some states, this applies to policy deductibles up to $50,000. It does not apply to policy deductibles greater than $25,000 or, in some states, losses caused by seepage and leakage of water not related to weather, unless an automatic water shutoff device is active at the time of loss.