Want to pay the lowest rate possible on every kind of insurance from car, to renters, to health insurance? Take the highest deductible you can afford.
Your deductible is what you’re responsible for paying after insurance takes care of its part. Depending on the type of insurance, your deductible could be anywhere from $250 (for a basic renters insurance policy) to $4,500 (for a health insurance policy). And those deductible levels depend not only on what type of policy it is, but also the insurance company from which you’re getting a quote.
The basic rule of thumb is that the higher your deductible, the lower your premium that you pay per month or year. That’s because by volunteering to take on more of the costs of an incident on your own, you signal to the insurance company that you’re a less risky client. Because you’re so willing to take on that financial risk yourself, you get rewarded with a lower price.
Of course, don’t sign up for a car insurance policy with a $1,000 deductible if you only have $250 in your emergency fund right now; if you do need to file a claim, you don’t want to end up in debt trying to come up with money for your portion of the bill. But if you have a robust emergency fund, turning to that first before filing an insurance claim can help you save a lot in up-front costs.