NEW YORK (MainStreet) — You can save up to 41% in home insurance premiums if you raise your policy's deductible — but there is risk.
Insurers will charge you less in premiums if you hike your deductible, although the amount you save depends on what state you live in, and often works in their favor by putting more financial burden on the homeowner in the case of such problems as fire or flood.
For example, if a small fire causes $4,500 in damage to your home and your policy has a $5,000 deductible, you're on the hook for the entire cost of repairs.
"Since savings vary so much from state to state, consumers need to consider the bottom line before increasing deductibles," says Laura Adams, senior analyst at InsuranceQuotes.com. "While switching from a $500 deductible to a $5,000 deductible sounds appealing because it lowers home insurance premiums by an average of 28%, it could be a risky move for consumers who don't maintain that much in savings."
Of course, homeowners can raise their deductibles less. Boosting a policy's deductible to $2,000 from $500 saves a homeowner 16%, on average, according to InsuranceQuotes.com.
Some states are more generous on their homeowner insurance rates than others. North Carolina for example, allows homeowners to save 41% on their policies by raising out-of-pocket deductibles. Rhode Island (26%) and Florida (23%) residents can also save big.
On the other end of the spectrum on saving with deductibles are such states as Hawaii (at 4% savings) and Texas (6%).
Insurance industry experts say the decision is really based on how you view homeowner's insurance.