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Choosing a Home Insurance Deductible

Insurance Insights

Choosing the right home insurance deductible is an important step when it comes to getting the most of a policy. Every homeowners insurance policy has a deductible, so it’s important that everyone involved in ownership has a say. But what is all considered when choosing the right deductible and what are some factors that play a role?

Let’s take a closer look and understand how to better choose a home insurance deductible.

What Are Home Insurance Deductibles?

A deductible is the amount of money a policyholder must pay out of their own pocket toward any damages or a loss before their insurance will take over a claim. Homeowners don’t actually pay a deductible to their insurance company like they would a bill or a premium. If a claim is filed and it is covered, the deductible is taken out of the amount claimed. If you have a $500 deductible on a $10,000 claim, the insurance company handles the remaining $9,500.

How to Choose a Deductible

A home insurance deductible should be as high as someone can afford within reason. The higher the deductible, the lower the cost of the their premium. Raising a deductible, which can happen, can significantly reduce the cost of a homeowners insurance premium.

When opting for the right deductible, homeowners should be weighing their short-term needs with their long-term needs, financially speaking. The more you can afford when it comes to the short-term, the more you’ll end up saving in the long-term. This is because premiums will end up being lower.

Every insurance company can be different from the next. But no matter the insurance company, if a claim is filed for any amount, the cost of your premium will go up due to the fact that any claim makes someone look like a bigger risk now. Plus, the more claims you file, the higher the premium will end up being in the long run. For this, if you have a low deductible, it may not be the best thing to file a claim. If there is a claim that’s low enough to pay out of pocket for, it’s probably best to do that instead of having insurance cover a low amount remaining.

Extra Expenses

What should also be kept in mind is emergency or available funds when it comes to paying a deductible. While raising a deductible can drop rates, it should not do so if it’s going to add stress to your life. Keeping a liquid emergency fund in place should add peace of mind.

Most homeowners policies also offer extra living expense coverage to handle hotel bills and other expenses that need to be taken care of when fixes are being made following a claim. But if your deductible takes up the entire emergency savings, there may not be any money left to cover those extra expenses.Bottom of Form

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