Understanding your home insurance insurance deductible.

July 22, 2020
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Understanding your home insurance deductible.

  Flat deductible vs. percentage deductible?

 

Most people don't have the time (or desire!)  to fully understand their insurance policies.   While it can be rather dull reading it is important that you understand how your deductible works.  In other words what you will have to pay out of pocket in the event of a property claim.  

Deductibles are a way that the risk is shared between you, the policyholder and your insurer.  Generally speaking, the larger the deductible, the less you will pay in premiums for an insurance policy.

Insurance policy deductibles can either be a flat deductible or percentage deductible.  Typically, you can find it on your policy declarations page.  Typically, deductibles apply to property damage, not to the liability portion of a policy.

Do you have a flat deductible

A home insurance policy has a dwelling deductible.   A flat deductible is a fixed dollar amount that you will pay out of pocket in the event of a claim.  Flat deductibles are straight forward and easy to understand.

Example of flat deductible:   If your homeowners insurance has a $1000 all peril flat deductible and your home suffers covered damage as a result of a hail storm with total damage of $20,000.  You will pay $1000 out of your pocket and your insurance company will pay $19,000.

Do you have a Percentage Deductible?

Percentage deductibles applying to homeowner policies are calculated based on a percentage of the home’s insured value.   There are some carriers which apply a percentage deductible to all covered perils (types of damage covered by your insurance company).   Other carriers may apply the percentage deductible to only the peril of wind/hail with a flat deductible for the remaining covered perils. 

Example of percentage deductible:  If your home is insured for $200,000 and your insurance policy has a 2 percent deductible and your home suffers covered hail damage of $20,000, you will pay $4000 out of pocket and the insurance company will pay $16,000.

Note:  Depending on the area you live in you may have a separate disaster deductible for earthquake coverage, flood insurance, hurricane and as mentioned above wind/hail.

Which is the best choice- flat or percentage deductible?

This depends on your comfort level and what you could afford to pay out of pocket in the event of a claim.  A lower deductible will reduce how much you pay when a claim occurs but will increase your premiums.  In turn if you are able to maintain a higher deductible, then it will lower your premiums.  *Tip:  Request your agent quote several deductible options for you so that you can compare the savings to the potential out of pocket costs if you have a claim.

Note:  Depending on the area you live in you may have a separate disaster deductible for earthquake coverage, flood insurance, hurricane and as mentioned above wind/hail.

Contact your local Shelbyville insurance agent, Terry McDaniel at 502.909.0920 for additional information.