If you file a homeowners insurance claim, you’ll have to pay a deductible before the insurer will pick up the tab for the remaining cost. Homeowners policies sometimes have several deductibles that are different amounts and that apply in different situations.
Types of Homeowners Insurance Deductibles
Some homeowners insurance policies have deductibles that are just a flat amount or just a percentage. Others have split deductibles, which means that a dollar value applies in most cases, but a percentage applies in some specific circumstances.
With a split-deductible policy, most perils are subject to a deductible in the form of a dollar amount. Deductibles for claims related to wind, hail and hurricanes are a percentage of the house’s insured value. Guidelines on when hurricane deductibles apply depend on each state’s insurance regulations. Usually, storms must be officially declared or named by the National Weather Service.
Deductibles for flood insurance can be a dollar amount or a percentage, depending on the state and insurance company. Earthquake insurance deductibles are available in a range of percentages. If a homeowners insurance policy includes endorsements for things such as water backups, service line coverage and equipment breakdowns, they may be subject to a separate deductible.
When You’ll Have to Pay a Deductible
If you file a claim for more than one type of loss, such as damage to your house and personal property replacement, in most cases you will only have to pay one deductible if all the losses were caused by the same event. You won’t have to pay a deductible for liability claims.
How to Choose the Right Deductibles
Generally speaking, choosing a higher deductible will result in lower monthly or annual premiums. When you select a deductible, make sure it’s one you can afford. You might enjoy lower premiums, but if you had to file a claim for major damage and couldn’t afford your deductible, you might have to scramble to find a source of funds or get stuck living in a damaged home.
Choosing the right deductible is particularly important if you live in an area prone to severe weather and your deductible for those types of losses is a percentage of your home’s value. In that case, your deductible could be tens of thousands of dollars. You might be better off paying more in premiums to avoid a large out-of-pocket expense.
Look for Other Ways to Keep Your Premiums Affordable
If you’re concerned about the cost of your homeowners insurance premiums, there are other ways to stick to your budget. Insurance companies offer several discounts that can help customers save money and many people qualify for more than one. You may get quoted reduced rates if your home has safety features, if you bundle multiple policies and if you meet other criteria. Discuss deductibles, discounts and premiums with an insurance representative or with your agent.