3 Common Homeowners Insurance Deductible to Be Aware Of

3 Common Homeowners Insurance Deductible to Be Aware Of

A homeowners insurance can cover losses and damages to your house and assets. This type of insurance composes of several essential components. Besides the coverage limits and premiums due, you also have to consider the homeowners insurance deductible that can come into play during an insurance claim.  

Getting To Know Homeowners Insurance Deductible

A homeowners insurance deductible is the amount you agree to pay before your insurance enters to cover the remaining expenses of your claim. The deductible is usually in a fixed dollar amount that usually ranges from $500 to $2,000 or higher. Furthermore, a deductible can also be expressed as a percentage of your home’s insured value.

The deductible automatically applies if you file a claim. So, for example, if you choose to have a $500 deductible, you will shoulder the first $500 when you file a claim. At the same time, the insurance company covers the remaining expenses. 

In addition, understanding what is a deductible in home insurance can help you make the best decision in protecting what may be the most expensive purchase you might make when it comes to homeowners insurance. 

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Types of Home Insurance Deductible

After knowing what a home insurance deductible is, it is vital to remember that it has several types. Here’s how each type works:

  1. Flat Deductible

The flat homeowners insurance deductible is expressed in a fixed dollar amount. With this, you agree to provide a set amount you’re expected to pay for an insurance claim. 

For example, suppose you decide to have a $1,000 deductible. That will be the flat amount you will have to pay during each insurance claim.

2. Percentage Deductible

As the name suggests, this common type of deductible dramatically depends on the percentage of your home’s insured value. 

For example, suppose your home is insured for $150,000, and you agreed on the deductible of 2%. In that case, you’re responsible for paying the first $3,000 during an insurance claim.

3. Split Deductible

Several insurance companies provide a split deductible, which is considered a hybrid. With this, you can apply a flat deductible to ordinary claims. On the other hand, you can also use a percentage deductible for pre-specified claims.

For example, your insurance policy may have a flat deductible costing $1,000 for everyday occurrences, like roof repair or theft. However, it might also require you to pay a percentage deductible for claims due to hurricanes or typhoons, often referred to as disaster deductibles. 

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Choosing The Right Homeowners Insurance Deductible

Knowing how a homeowners insurance deductible works and its common types are the first step in helping you choose the right one. Below are some other tips you might want to consider:

  1. Determine What You Can Afford

It is vital to consider your budget and emergency funds to help you cover expenses like unexpected insurance deductibles. In addition, it will help if you choose a deductible that is not so high. That way, you can avoid financial hardship if you’re required to pay for it when an insurance claim happens.

After you have decided on the set amount of deductible you’re willing to pay, don’t forget to inform your homeowners’ insurance agent. They will then send you a quote that reflects your insurance premium and deductible based on what you can afford.

2. Assess the Risk Level You’re Willing to Take

A few homeowners are comfortable taking more considerable financial risks regarding their insurance. This means they decide to pay a lower annual premium, hoping they won’t need to file an insurance claim. However, doing so also means they will be required to set a higher deductible if an insurance claim is made.

On the other hand, some homeowners tend to choose the less-risky option. This is because they prefer to pay a higher annual premium to avoid any large deductible when a claim is made. 

3. Know How Your Insurer Takes Control of Deductibles

In most cases, insurers subtract the set deductible amount from the claims payout you will receive. However, in rare cases, some insurers expect their clients to pay the deductible up front. 

To avoid any confusion, you may want to ask your insurance company how they manage deductibles. 

4. Evaluate the Cost Difference in Changing the Amount

Remember that a lower deductible amount equals a higher premium and vice versa. Getting insurance quotes from your insurance agent would be best if you want to make some changes. 

In addition, make sure the quotes will be based on the different types of deductibles, and don’t forget to look for the one that fits your budget. 

To Sum It Up

A homeowners insurance deductible is the amount of money you’re willing to pay during an insurance claim. In contrast, your insurance will cover the remaining expenses. There are three common types: flat deductible, percentage deductible, and split deductible. Choosing which type depends on what you can afford and your comfort level with risks.

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