Let’s face it, insurance is a fact of life. In order to get a mortgage and keep it, homeowner’s insurance is a part of the puzzle we have to put together to be a homeowner. Even after the mortgage is paid off, not having insurance is tantamount to stupidity because if anything happens, without insurance, you’re out. What can we do to minimize the amount we have to scrape together every month so we can be protected?

One aspect of insurance that affects the “up front” cost we pay every month is the amount of homeowners insurance deductible we have to pay if something does happen. This is money we have to pony up if there’s a fire or storm or whatever other calamity that befalls us. With health insurance, it’s fairly easy to figure out how much to pay for a deductible. If you’re healthy and going to the doctor is only for your yearly check-up, but you want homeowners insurance for the big things, then you can choose a high deductible. It’s a lot less expensive to pay for that one trip to the doctor than it is to have to pay for all the visits required to meet the deductible. This means your monthly payment is relatively inexpensive.

The same applies with homeowner’s insurance. If you live in an area where tornadoes and fires aren’t high on the agenda of things to worry about during the year, then a higher deductible isn’t a bad thing. Very rarely will we have to pay anything out of pocket for a repair or issue that will be more expensive than our yearly deductible. As with the health insurance example above, this means our monthly payments are relatively inexpensive. But, they don’t call it insurance without good reason.

Things do happen. Fires, floods, hail storms, extreme snow, ice, wind damage, tornadoes and hurricanes are just part of the list of events that can damage or destroy our homes or businesses. We see stories in the news every day about a disaster somewhere that leaves hundreds, even thousands, homeless. If we can afford to pay the initial deductible, the homeowners insurance we have kicks in and everything gets fixed. Homes rebuilt, cars replaced, roofs redone, carpets cleaned, walls painted, trees replanted, etc. are all taken care of. The problem is, can we afford that initial deductible?

Careful planning is required to ensure we are covered in a way that makes sense. Many times, the deductible seems like it’s isn’t very important, but in order for insurance to cover the part it has to, that initial amount has to be paid out. It doesn’t help matters to have insurance to pay $40,000 to replace a roof that’s blown off if we can’t pay the initial $7500 deductible.  If paying a higher monthly premium means we can afford the deductible when something happens, then we need to build that into our budget.  Having a deductible we can afford may cost an extra $50-100 per year, but that extra money on the policy premium can make the difference in being able to rebuild, and having to move away forever. Again, plan carefully.