Understanding Homeowners Insurance Deductibles

All types of insurance have deductibles, and how they work varies slightly based on what type of insurance you have. However, there’s one quality all deductibles share: they’re the amount of money you must pay out before insurance coverage fully takes over. Essentially, you pay the deductible, and the insurance company pays the rest. If the amount you need to pay for a potential insurance claim is less than your deductible, you’re better off paying it out-of-pocket, rather than submitting a claim. Read on to learn more about the types of homeowners insurance deductibles and how they work.

How Homeowners Insurance Deductibles Differ

Health insurance deductibles and homeowners insurance deductibles work differently in one fundamental way: homeowners insurance deductibles are on a per-claim basis. You may be more familiar with health insurance, which has a maximum amount you pay out-of-pocket each year. With home insurance, you are responsible for paying the deductible every time you make a claim. The one exception is if you live in Florida and sustain hurricane damage multiple times in a season. If this happens, you only pay once per hurricane season. 

Standard Deductible

A standard homeowners insurance deductible is similar to most deductibles. It’s a fixed dollar amount that typically ranges from $500 – $2,000. For most insurance claims, this is the type of deductible you’ll use. The amount you pay for this type of claim stays the same regardless of the cost of the damage to your home. 

Percentage Deductible

Some claims require a different deductible. Situations like wind, hail and hurricanes have their own deductibles, which are based on your home’s value. They can be set between 1% and 10% of the value of your home at the time you insure it. Just like a standard deductible, the percentage is the amount you pay toward the total cost of a repair or replacement that’s needed due to these weather conditions. This type of deductible is part of a standard insurance policy. 

Disaster Deductible

Not all disasters are covered by insurance. Earthquakes, mudslides, flooding and sinkholes aren’t typically covered. Florida requires that ground cover collapse to be covered under insurance, but some companies still don’t cover sinkholes. You’ll need to review your specific insurance plan. These are typically based off of a percentage of your home’s value, but it may be higher than what you would pay for your percentage deductible. This is especially true if you live in an area that’s prone to natural disasters. Flood insurance is an exception to the percentage rule. Deductibles for flood insurance tend to range from $1,000 to $10,000. 

How to Choose a Deductible

Ultimately, the dollar amount of your standard deductible and whether you add disaster insurance beyond what’s covered is up to you. Would you prefer to have lower monthly payments and risk having to pay a high amount in the event of an emergency? Or does it give you more peace of mind to have higher payments and a lower deductible? It all depends on your situation and what makes you the most comfortable. 

Homeowners insurance is there to keep you covered in the event of an emergency. Find home insurance coverage options from over 50 top-rated home insurance carriers in less than 5 minutes today by using Nsure.