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New Study Shows Homeowners Could Be Saving
A new study reveals that some homeowners could be saving more each month by paying attention to their reluctance to file claims.
(PRWEB) October 6, 2006 -- A new study reveals that some homeowners could be saving more each month by paying attention to their reluctance to file claims.
According to a new study from MIT's Sloan School of Management, many homeowners don't file insurance claims for relatively minor damage to their homes, even if the repair costs exceed the deductible.
"Suppose your deductible is $500," says Michael Braun, one of the four authors of the report. "A baseball comes flying through your window and it costs $700 to repair. If you file a claim, you'd get $200 back. Would you file that claim?"
He explains that some would, but others would think it more of a hassle. Some would worry that their premium would go up as a result.
"There are a whole host of reasons why people might decide not to file a claim," said Braun.
The study reveals that homeowners have their own individual unstated dollar threshold for when they file a claim. The study looked at a random sample from a State Farm database of around 1 million homeowners policies in effect in six Midwestern states from 1998 to 2003.
The study's authors named the threshold a "pseudodeductible."
That is the level below which you will not bother to file a claim, explains Braun.
The study found that in many cases, the homeowner could have paid a lower premium by purchasing a policy with a higher deductible that was more in lines with their pseudodeductible. More than half of those studies revealed that they had a pseudodeductible that was higher than their actual deductible.
In general, going from a $500 to a $1,000 deductible will save you 10% to 15% off of your premium costs. The savings go up with the deductible level.
Braun says the key for homeowners is to assess their actual claims-filing behavior.
"If the total amount of the loss is greater than the next highest deductible level that I could purchase, then I should think really long and hard about increasing my dedictible."
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Martin Lukac represents http://www.RateTake.com, an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateTake.com also operates San Diego loan portal http://www.LendingSanDiego.com.
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