How should I calculate my deductible?

Q – I’ve been told that by increasing my deductible I can reduce my home insurance premiums? What’s a reasonable trade-off? – S.T.

A – There is a little used rule of thumb for deciding how much of a deductible to accept on a homeowners’ policy.

In most cases, a deductible equal to 3% of your net worth is suggested. By that measure, if your net worth is $500,000, you would be advised to opt for a deductible equal to $15,000 on a home insurance policy.

But be reasonable. Such a payment may not be within your immediate means if disaster strikes, so take your likely cash position into consideration as well. And speak to your insurance professional before making any changes.

– G.P.N.