All You Need to Know Before Choosing Homeowners Insurance Deductible
While trying to figure out the type of homeowners insurance you would like to purchase, selecting the right type of deductibles is an important part of that choice. A homeowners insurance deductible is the sum of money that the homeowner must pay before the insurance company pays its part. As a homeowner, it is important that your home has proper coverage, but you also don’t want to pay way more than is needed.
To make sure that this doesn’t happen, you have to pay close attention to the type of deductible you choose.
Types of Homeowners Insurance Deductible
- Standard Deductible:
This is a fixed dollar amount deductible where the sum of money you pay stays the same, no matter the level or cost of damage. For instance, suppose a small fire breaks out in your kitchen, and the amount of damage incurred is $6000. If your deductible is $2000, you have to pay that amount before your insurer would take care of the remaining $4000.
- Percentage Deductible:
This type of deductible is usually paid for damages caused by hail, winds, and hurricanes. It is calculated as a percentage of the value for which your home is insured. These deductibles are usually between 1-10% of the insured value. So, if your home is insured for $400,000, and your deductible is 2%, you would pay $8000.
- Split Deductible:
This is a combination of both the standard deductible and the percentage deductible. A split deductible uses the fixed dollar amount deductible in most cases but may switch to a percentage-based deductible in certain situations, such as damages caused by natural disasters like earthquakes, tornadoes, etc.
What Is a Disaster Deductible?
Although damages caused to your home by wind, hail, and hurricane have coverage under a standard insurance policy, insurance for some other natural disasters must be bought and handled separately. The rules that apply to these disasters related to your deductibles are different, and the requirements for coverage may depend on factors like the location of your home.
- Your personal property is damaged by a federally declared disaster or,
- You live in an area declared as a high-risk zone by the President.
How to Choose the Right Deductible
Choosing the right deductible isn’t easy, but it is an important decision that must be made carefully. Here are some things to consider to ensure that you choose the right deductible.
- The first thing to do is to consider how much you can afford to pay out as a deductible. If you’re a new homeowner, you might need time to recover from the expenses incurred in getting a new house. However, if you’re a well-settled homeowner with a greater awareness of your coverage needs, you may consider looking for smart ways to pay a higher deductible while getting the advantages of a lower premium.
- Also, consider the location of your home. Do you reside in a high-risk or high-cost location? Note that your location can affect your premiums and deductibles.
- Consult with an insurance expert who will guide you through the decision-making process.
Choosing the right deductible is very important as a single wrong choice can result in a huge financial loss. Contact us today at Remland Insurance. Our experts will help answer questions about all your insurance needs.