Understanding Your Deductible

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If you have car, health, or other types of insurance, you should know what a deductible portion of your coverage is. Your deductible is the amount of money you will need to pay on a loss or claim before your insurance policy can cover the rest. For homeowner’s insurance, deductibles are calculated in two ways.

Percentage Homeowner Insurance Deductibles

This deductible calculation began on earthquake coverage in the west in the 1990′s. It also began showing up in windstorm and hurricane coverage in other areas of the country.

Deductibles are usually 1 to 5% of the insured value of the home. If your home is insured for $300,000 and you have a 2 percent deductible, this means you’d have to pay out $6000 before the insurance company begins paying out. Normally, this is more costly than the traditional deductible.

Traditional Homeowner’s Insurance Deductibles

Traditional homeowner’s deductibles are a usually on a flat amount. For example, if you have a $500 deductible, and an incident occurs where the damage estimate is $5000. You will pay the first $500 while the insurance company will pay the remaining $4500.

If you want to lower your monthly premiums on your home insurance, you may want to consider increasing your deductible to amount as high as you’re comfortable with. The higher your deductible, the lower your premiums will be.

*In some states or areas where a natural disaster can be more common (such as hurricanes and Florida), your deductible may be set and cannot be changed.