One of the major elements of your home insurance policy is your home insurance deductible. It is the amount of money you have to spend to repair damage before your homeowners insurance policy will kick in and begin doing its job. It determines your out-of-pocket expense for repairs and has a significant impact on your premiums.
Understanding Your Home Insurance Deductible
To understand how your deductible affects your premiums, you must know how a deductible works. For example, consider that you have wind damage that amounts to $2,800 in repair expenses and you have a $1,000 deductible. You will pay the first $1,000 of the repair expenses and your home insurance policy will then kick in and pay for the remaining $1,800. Also realize the deductible for home insurance works more like your auto insurance deductible than your health insurance deductible. For health insurance, the deductible is usually a yearly deductible, but a home insurance deductible resets for each qualifying incident.
The Purpose of a Home Insurance Deductible
The reason why a deductible exists for home insurance is to keep policies more affordable. The purpose of having homeowners insurance is to protect you financially from the big losses. You can financially handle laying out $500 to $1,500 for repairs, but not the total rebuild of your home. Therefore, placing a deductible on the policy reduces the risk and payouts of home insurance companies, so they can afford to offer lower rates. Essentially, the deductible puts more risk on your shoulders and takes it off the insurance companies.
Home Insurance Deductible Ranges
The deductibles offered by home insurance companies will range quite widely. Most insurance companies offer deductibles ranging from 0 to $2,000, with some companies offering deductibles as high as $5,000. Usually, the choices will be round numbers such as $500, $750, $1,000 and $1,500. The most common deductibles are $500 and $1,000. When choosing a deductible, you want to find the right balance. First consider how much you can afford to pay out of pocket at one time. Next, find out at what point an increasing deductible no longer provides an appropriate reduction in rates?
No Golden Rule to Home Insurance Deductibles
There is no golden rule as to how much your rates will lower as you increase your deductible. Each home insurance company will have their own rate structure and this structure does not always result in a specific cost decrease associated with a specific deductible increase. For example, raising your deductible from $500 to $1,000 may reduce your premiums by $150 for the year. However, an equal increase from $1,000 to $1,500 may only yield a savings $100 for the year.
Rate Quotes for Home Insurance Deductible
The best way to truly gauge the affect your home insurance deductible will have on your premiums is to get homeowners insurance quotes. It is rather simple. You can get a set of quotes with, say, a $500 deductible and then get a set with a $1,000 deductible. The difference in cost will be right there for you see and you can also see how each company is different. Use the quotes to find the right deductible as well as the homeowners insurance company ready to offer you the best home insurance rates.