Homeowners Insurance Deductibles
Homeowners Insurance Deductibles
Homeowners policies are complex and have many coverage limits as well as exclusions. While it is recommended you read the policy, it is best to have a dedicated insurance agent to help guide the way and point out policy coverages and options that are best for you.
What Is A Deductible?
Every homeowners policy includes a deductible. Most policies have a single “All Perils” deductible between $500 and $1000. The deductible is what you would pay first and the policy will pay the rest of the claim. Here’s an example; should your home or condo be damaged by a covered claim (fire, theft, water damage) and you submit or report the claim, the insurance company would pay the claim to repair the damage less the deductible.
How Much Should My Homeowners Deductible Be?
We generally recommend a $1000 deductible on your homeowners insurance policy. However, every homeowners policy is different in how they rate higher deductible amounts, it is best to review this with your insurance professional and determine if raising your deductible can help you save on your insurance costs and if the increased deductible fits your budget.
High Deductible Vs. Low Deductibles On Home Insurance Policies
The primary benefit of raising your deductible on a homeowners policy is to help reduce your overall insurance costs. It's important to determine the reduced costs vs. the raised deductible. Will the raised deductible savings be eliminated if you have a homeowners insurance claim or loss in the near future? If there is only a minimal cost reduction when you increase the deductible, a claim can quickly erase any cost-benefit when the deductible is applied to a claim.
Is It Worth It To Raise The Deductible?
Raising the deducible can help reduce your premium. However, it's important to consider if the premium is not reduced much with a raised deductible, it may not be worth it. For instance, if you increase the deductible from $1000 to $2500 with a premium difference is only $40, if there is a homeowners insurance claim in the next five years, the cost of the increased deductible will eliminate any premiums savings you might see.
Additionally, be sure to choose a deductible you can afford to pay in the event of a claim. Your annual premium may be lower if you raise your deductible, but you shouldn't increase your deductible if you can't afford it in a claim event.
Hurricane & Windstorm Deductibles
While many know of the “All Perils Deductible,” there are lesser-known and separate Hurricane and Windstorm deductibles that can be included in a homeowners policy and affect you in a claim. The hurricane deductible is required in policies for homes near or within several miles of the shoreline. However, even homes inland can have hurricane/windstorm deductibles. This deductible is generally 1 - 2% of the dwelling coverage amount. To put this in perspective, if your home is insured for $500,000, the hurricane and windstorm deductible could be $10,000. Hurricane deductibles are used for named tropical storms, whereas windstorm deductibles can be used if the wind is 75 mph or greater. This means should a windstorm cause damage to your roof, you would be responsible for the windstorm deductible, which is a percentage of the home coverage.
Homeowners Association Master Policy Deductibles
If you live in a condo community, your homeowners or condo association may have a “Master Policy Deductible”. Should your unit be damaged in a claim, you may be responsible for the association’s master policy deductible, which can range between $5,000 to $10,000 per unit. When requesting a condo or townhome insurance quote, be sure to check first with your HOA or condo association to verify if you are responsible for a master policy deductible if there is damage to your home and how much it is.
Always review your policy or check with your insurance advisor to determine what deductibles you may be responsible for. It’s better to know what you may be accountable for before something happens than after a claim occurs.