Choosing the right deductible is vital to getting the most out of your homeowners insurance policy. Every policy has a deductible so every person buying homeowners insurance will have to make this decision.
What Is a Home Insurance Deductible?
Let’s start with the basics, and answer this common question first.
A deductible is the amount of money a policyholder must pay out-of-pocket toward damages or a loss before their insurance company will pay for a claim.
You do not actually pay your deductible to your insurance company like you would a premium or bill. If you file a claim and it is covered, the deductible is subtracted from the amount claimed.
For example, say you have a $500 deductible and you file a claim for $10,000. Your insurance company would pay you $9,500 for that claim.
Choosing What’s Best For You
Your personal situation is going to vary from the next person, so it’s important to remember to decide what you can afford. Consider that the deductible amount will play an important factor in the amount of your monthly premiums, so think about what you can afford monthly as well as what you could afford in the event of a claim.
Raising your deductible can reduce the cost of your homeowners insurance premium as much as 20%, but that does not mean you should raise your deductible as high as possible. If you raise it as high as possible and a claim is needed, you could be out of pocket a huge sum of money.
Some insurance providers even allow you to have a different deductible for different situations. For example, $500 for fire damage and $1000 for damage caused by hurricanes.
You should also keep in mind your emergency or available funds with an eye toward paying your deductible. While raising it can drop your rates, it should not do so at the cost of financial stress. Everyone should have a liquid emergency fund in the event of unpredictable circumstances.
A homeowners insurance deductible might be one of those so consider what you you have saved for an emergency when choosing your deductible.
At the same time, it’s not a good idea for your deductible to entirely wipe out the savings you’ve set aside for an emergency. You might need additional emergency funds at the time you have to file a homeowners insurance claim.
For example, say a fire or tornado destroys half of your home and it is uninhabitable. Most homeowners policies also offer additional living expense coverage to take care of hotels bills, restaurant meals and other expenses.
But what if you reach your limits for those expenses or need money for another emergency? If your deductible consumes your entire emergency savings, you might not have the money to cover those expenses.
Conclusion
What’s going to be best for your family is very specific to your needs, so it’s best to sit down with an experienced Sarasota insurance agent to go over all of the details. A consultation like this can allow you to get all of your questions answered, and to choose a policy and deductible that is fit specifically to you and your family.
