With insurance you may have a yearly deductible, as is the case with most health insurance companies, or you may have an incident deductible, which means each time you make a claim you will meet your deductible before the insurance pays out. So, let's say your home owner's insurance deductible is $300. If you were to have a flood, and the insurance adjuster determined that the cost to repair the damage was $5800. The insurance would pay out $5500, as you would be responsible for the other $300. This means that if the total damage costs less than the deductible amount, the insurance pays nothing out, and it is up to you to have the repair made, etc.

The premium for insurance is the amount per month or quarter that you pay. For example, your car insurance premium may be $600 a year, or $50 a month. By paying the insurance company this $600 a year, they are assuming some of the financial risk of the thing insured, whether it is a car, a home, a scooter, a pet, etc. The premium amount is tied closely to the deductible that you set. This is because if you raise your deductible the insurance is going to be able to pay out less, and less frequently, and thus can charge you less in return.

So, this sounds good, but you have to remember that you can't just raise your deductible too high. What if you have to meet it? For example, if your current deductible for health insurance is $750 a person, you could raise it to $5000, and save a boat load on your premium, but if you had an accident, injury, pregnancy, etc. you would have to pay out $4225 more out of pocket before your insurance kicks in. So, you have to choose the maximum deductible you are comfortable, and capable of paying.

Before you raise your deductible make sure you can manage the larger deductible payment, if and when an accident or illness happens. If you can, then opting for a slightly higher deductible in exchange for a lower monthly premium can be a great way to save several hundred dollars each year, especially if you never have to make a claim to your insurance.

Typically the biggest savings occur with raising the deductible on your car insurance. This is where they are least frequently met, and garner the biggest returns. For example, if yo have a $500 deductible, and raise it to $1000, you can save about 25% on your insurance premium. This is a huge savings. With home insurance you are looking at around 15% savings for raising deductibles, and for health insurance, it is really hit or miss, but is closer to 10%, if anything.

Raising your deductible means freeing up some money each month to put into a cash reserve.