Insurance is very abstract until you need it, minus that pesky bill that comes reminding you at every renewal. Then, when you do need it there is that blasted deductible. Can be very frustrating.
Insurance is about managing risk. How much risk do you want to maintain and how much do you want to transfer to the insurance company. Your deductible is the measured amount that you are still willing to take on yourself. When I meet with clients we look at a couple of factors:
- What is your disposable income in order to financially replace money spent on a deductible?
- What does your emergency savings account look like?
- How much will it save on your insurance premium by taking a higher deductible and is it worth it?
Choosing your deductible directly relates to how much money you have in your emergency account and how long it would take to replace this amount if spent.
Just renewing your insurance year after year without review can be dangerous to your fanancial stability. If your agent is not asking you about your deductilbles you should be asking him/her.