One of the biggest factors in choosing insurance, whether it’s auto, homeowners, or health insurance, is the cost. But the cost isn’t just the monthly premium you’re paying; it’s the entire out-of-pocket cost you will pay if you have a claim.
It’s easy to select the least expensive premium plan because so many of us have the “it could probably never happen to me” mentality and paying less on a monthly basis is much more appealing. But consider why you’re buying insurance in the first place…or the peace of mind of knowing that even though it “probably” couldn’t happen, there’s a chance it will and you want to be covered.
When choosing between a lower premium with a higher deductible, consider how you would be able to pay for that higher deductible if you had a claim. If you have emergency savings built up to cover it, then a lower premium plan would likely make sense. But if you don’t have that deductible saved up and would need to use a credit card with a high-interest rate to cover it, then choosing a lower deductible with a higher premium is likely a better option for you. Of course, there are more factors to consider than just premiums and deductibles, but how your insurance premiums and potential claims factor into your cash flow is a good starting point.