Why Is My Deductible So High?

When it comes to choosing a home insurance deductible, you need to think through the financial implications. Deductibles can be either a flat dollar amount or percentage of your home’s insured value. The latter type is more common in claims related to natural disasters, such as hurricanes and earthquakes. The amount you select should match the out-of-pocket cost of a claim and the month-to-month cost of your premium.

How Does A Home Insurance Deductible Work?

The deductible amount you choose when you purchase home insurance is an important part of your policy. It determines how much money you must pay out of pocket if your home experiences a covered loss, such as a fire or theft. Your deductible works in tandem with your premium to make sure you’re adequately insured in the event of a claim. A higher deductible is generally better than a lower one, as it will save you money in the long run by reducing your out-of-pocket expenses should you need to file a claim. Most homeowners insurance policies allow you to choose a deductible amount, which is an important consideration for your budget and your peace of mind. However, it’s best to consult with a professional before deciding on the right deductible for your needs.

What Purpose Does a Home Insurance Deductible Serve?

Your home insurance deductible is the amount you agree to pay toward your home insurance claim before the insurance company picks up the rest. It serves to limit your out-of-pocket expenses in the event of a covered claim and can have a significant impact on your premiums, too. Most homeowners opt for a deductible of $1,000 or higher. While these are the standard amounts, you can often find lower deductibles as well. There are two main types of deductibles for homeowners: fixed dollar amount and percentage-based. A fixed dollar deductible is usually $500 to $2,000, while percentage deductibles typically range from 1-10% of the total policy coverage. Another type of deductible is a disaster deductible, which applies when you insure your home against certain natural events like hurricanes and earthquakes. These deductibles are separate from your primary deductible and can vary by insurance company. When choosing a home insurance deductible, the best way to go is by considering your budget and whether you have any emergency savings to cover unexpected costs in the event of an accident or loss. You also want to make sure that the deductible you choose isn’t so high that it could put your financial future at risk should something happen.

Receiving A Lower Deductible

If you’re on a tight budget and don’t have a substantial emergency fund set aside to cover unforeseen expenses, it may be wise to go with a lower deductible until you can build that money up. However, once you do have an emergency fund, it’s wise to raise your deductible as soon as possible. You’ll be able to use that money to pay for smaller issues on your own without having to file an insurance claim. This is a trade-off that’s often made for people who don’t have much cash in their bank accounts or savings. It’s an important one to make because a high deductible can be a huge drain on your finances, even if you don’t need it.