Higher deductibles lead to lower premium payments

Personal finance is an adjustment game. When policy holders look at their budgets and the homeowners' insurance they can reasonably afford, the cost of premiums can strain finances. While a low real estate insurance deductible (the agreed-upon amount homeowners pay to cover damages in the event of an emergency) can save a policy holder considerably when a claim occurs, it costs more in the short-term. 

Raising a deductible is not a decision to make without thoughtful consideration, but it could be the right choice to get through a difficult financial period, or to alleviate monthly costs. Incurring more responsibility in the unlikely event of a claim drives monthly rates down considerably. According to Credit.com, a policy holder can pay between 10 and 30 percent less for their insurance if they increase their deductible from $250 to $1,000. 

When raising your deductible, any insurance advisor will tell you to be prepared: set enough cash aside to fulfill your obligation if something happens to your home. Investing in an emergency fund for homeowners' costs might make more sense in the long-term than paying higher rates for a provider's assistance. For claims that could reach the tens of thousands of dollars in damages, or even a total loss, the amount you pay is still a small portion of the total cost. 

"A well-funded emergency fund means a minimum of a couple months' worth of living expenses, plus more if you have dependents," said Trent Hamm of the Simple Dollar. "If you have that kind of cash that can be accessed with ease, then by all means, raise your deductibles."

However, the risk of increasing your deductible without preparation can be like pouring gasoline on a burning flame, as far as personal finance is concerned. Working with an expert to determine the best allocation of your resources and responsibility can tailor a policy to your needs.