• Kelly Ann

Understand Your Insurance Deductible


 

Are you prepared to pay your insurance deductible? At any time, there could be damage to your home. It could be a pipe burst, leak, storm, fire, or any other number of emergencies. Having homeowner’s insurance is a critical piece of keeping your home and items protected should harm come. But just as important, is that you understand what will be required of you when the time comes to file an insurance claim.

 

What is a Deductible?

  • When you file an insurance claim, you will be responsible for your deductible. The deductible is the amount of money you will pay before the insurer pays their part based on the terms of your policy.

  • There are typically two types of deductibles, dollar-amount and percentage based. Dollar-amount deductibles are the most common, and they are a set amount chosen when you purchase a policy. No matter the amount of your claim, the deductible remains that set amount. Percentage-based deductibles are becoming more common, especially in high-risk areas. This type is based on a percentage of the estimated replacement cost of the covered home or business.

  • For dollar amount deductibles the amount you pay comes out of the claim payment. For example, if you pay a $500 deductible and your claim is for $5,000, you will receive a claims check for $4,500.

  • Percentage deductibles are based off a percentage of your homes insured value. For example, if your home is insured for $200,000 and you have a 1% deductible, $2,000 would be deducted from your claim payment. If your claim was for $10,000 your coverage amount would be $8,000.

  • Deductibles apply each time you file a claim.


How Do I Know What My Deductible Is?

  • Deductibles are typically dollar or percentage amounts. The amount you choose is locked in with the terms of your coverage when purchased. Your deductible can typically be found on the front page or declarations page of your insurance policy.


What is the Difference Between a Premium and a Deductible?

  • A deductible is the amount of money you will pay out-of-pocket toward damages or a loss before your insurance company will pay for a claim. A premium is the amount you pay for an insurance policy (typically monthly) to keep it active.


What Should I Consider When Purchasing Homeowner’s Insurance?

  • The higher your deductible the lower your premiums and vice-versa. Premiums can often be reduced by upwards to 20% with a higher deductible however, raising your deductible higher is not always the best choice. If you are financially able and prepared to pay higher deductible funds, then raising your deductible rates could be the right choice for you. You will see a difference in your premium rates but, be aware that if you need to file multiple claims in a year your financial obligations may be higher overall. Multiple claims may also increase premium rates due to your higher liability for a claim. These are things to take into consideration.

  • You don’t want the cost of your deductible to cause added stress to an already difficult situation. Plan ahead, have an emergency fund, and know what you are financially comfortable covering if the need arises for you to make a claim. Remember, there are several options out there and talking to your insurance agent may help you feel more secure in your coverage. Agents can run quotes with various deductibles to help determine what is the best value for you.

 

Having insurance is important, but it does not end there. Planning ahead and preparing for the possibility of having to cover a deductible should also be on your radar.





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