How Does a Home Insurance Deductible Work?

When you purchase a home insurance policy, one of the many decisions you will make is over your home insurance deductible. An insurance deductible is how much you must pay out of pocket before receiving compensation for a home insurance claim.

For example, say a bad storm sweeps in and causes $3,000 worth of damage to your home. Your home insurance deductible is $1,000. This means that you must pay $1,000 toward repairs for your deductible before receiving compensation for the remaining balance (in this case, $2,000). Once you have reached your deductible, your home insurance policy should provide compensation for the rest of the damages as long as they are covered. 

How Much is a Home Insurance Deductible?

Home insurance deductibles vary depending on your policy. When you purchase home insurance, you will have the ability to adjust your coverage and deductible as needed. Most home insurance deductibles are $500 or $1,000, though higher limits are available. A higher deductible can save you money on monthly premiums, but it also means paying more out of pocket when it comes time to file a claim. If you wish to save on monthly premiums and can afford large expenses out of pocket, you may choose a higher deductible. If you cannot afford such sudden expenses, however, you may want to keep your home insurance deductible to a minimum. 

If you have any questions about your home insurance policy or your deductible, be sure to ask your insurance agent. 

Types of Home Insurance Deductibles 

There are generally two types of home insurance deductibles: dollar amount and percentage-based. Deductible offerings will vary by insurer. A dollar amount deductible is a set dollar amount you must reach that is decided upon between you and the insurer when you purchase a policy. A percentage-based deductible is calculated based on your home’s insured value. For example, if you insure your home for $200,000 and your home insurance deductible is 1%, your deductible will be around $2,000. 

Deductibles apply to every aspect of your home insurance, such as dwelling coverage, personal belongings coverage and liability insurance. Make sure you are comfortable with your policy and your deductible. Home insurance is designed to help you when you need it, not to create more stress. Make sure your deductible is reasonable for your home and your budget and adjust your coverage to suit your home’s needs.

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