What Is a Deductible for Homeowners Insurance?

A homeowners insurance deductible is a specified amount of money that you agree to pay to the home insurance company before a claim can be made. Your homeowners insurance deductible influences the price of your home insurance premium. For example the higher you choose your deductible to be, the lower your premium will end up being. In addition, the lower the deductible is, the higher your insurance premium will be. Because of this fact, it is vitally important to make sure you choose the home insurance deductible that truly fits your needs.

In this article we break down homeowners insurance deductibles to help you understand your policy in greater detail. Making adjustments to your homeowners insurance deductible may be necessary when comparing homeowners insurance policies with different home insurance companies. 

Homeowners Insurance Deductibles

Before you can file a homeowners insurance claim, you will be required to pay a deductible. All homeowners insurance policies come with a deductible, but there is a little flexibility in terms of the amount. When making changes to the amount of the deductible, please keep your individual situation in mind. 

If you have money put away to pay the cost of a higher deductible then taking the lower annual premium may be an option. Although, you may be in a situation where a lower deductible and a higher premium may be a better fit your current situation. You have to analyze your necessities and determine what you believe is best for your situation. 

There are some home insurance companies that may set the deductibles as a percentage of the policy’s coverage levels. As an example, if your home is insured up to $400,000 and your deductible is equal to 1% of the coverage limits. Typically you would pay a set dollar amount, but with our example you would end up paying $4,000 as your deductible. 

Usually percentage based deductibles are dedicated to particular covered perils. Most states where homeowners deal with heavy wind, or hail damage offer deductibles as a percentage versus a set dollar amount for similar covered perils. 

Who is responsible for paying my homeowners insurance deductible?

The home insurance deductible, is paid by the homeowner. Although, you may not even pay a deductible out of pocket. There is a good chance your home insurance company may just subtract the deductible from the claim amount. For example if the home insurance payout ended up being $20,000 and your deductible is $1,000, the settlement would end up being $19,000. 

Average homeowners insurance deductible

There isn’t really a standard homeowners insurance deductible, but the majority of homeowners insurance companies offer deductibles of $1,000 and up. Then there are also a lot of homeowners insurance companies that offer deductibles between $250 and $500. It’s very rare to find a company that will offer a zero deductible policy and the ones that do also come with very high premiums. 

A common deductible is $1,000. Although this means you would end up paying $1,000 to file a claim, it will make your premium more affordable than a deductible of $250 or $500. 

Choose the deductible that’s right for you

Knowing that a higher deductible will land us a lower homeowners insurance premium is tempting, but is it the right move for your personal situation. Please keep in mind that your homeowners insurance deductible sets the amount you can file a claim on. 

As an example if you had a $20,000 deductible and $5,000 worth of damage was caused to your home, dollar for dollar it wouldn’t make sense to file a claim. Now if you had a $1,000 deductible and filed a claim on that same $5,000 worth of damage, you would recover $4,000. 

You have to understand that filing claims will raise your insurance premium and it can hurt your insurance score. If you’re in a position to replace items under a certain dollar amount you may want to set your deductible around those levels. For example you may be able to replace everything valued at $2,000 or less fairly easily. Then may a deductible around $2,000 will work for you. 

Everyone’s situation is different and every homeowners insurance company has different rules and guidelines. If you need help navigating homeowners insurance policies or help determining a proper deductible, you should speak to an insurance professional. 

At Eugene C Yates Insurance Agency we have professional homeowners insurance agents that specialize in getting our clients great rates that fit their individual needs. Call us today for better home insurance! 916 313 6100