Home Insurance Deductible - What Is It, And How Does It Affect Me?

When shopping for home insurance, many home owners do not realize that they have deductible home insurance. Owners who do realize this fact often do not realize how much is the home owner insurance deductible, which can set them up for disaster should they have a claim. There are different types of deductible home insurance policies, and they affect the home owner differently.

Types of Home Owners Insurance Deductibles

Home owners insurance deductibles fall into two main categories: percentage based deductibles and fixed deductibles. There are certain claims and insurance types that have no deductible at all, but this is rare. Knowing which type is the home insurance deductible you are working with is crucial to receiving the payment you need when you have a claim.

Percentage Based Deductible

A percentage based deductible home insurance owner faces a deductible that is based on a percentage of the total claim. This percentage is usually fixed, but the deductible has no upper limit. This can be devastating when facing a large claim, but nice when facing a small claim. Some insurance plans use percentage based deductibles on certain types of claims, such as hurricane and tornado damage.

Fixed Deductible

A fixed deductible is a set monetary amount that you will have to pay when you have an insurance claim. It does not matter the total claim past the insurance deductible amount. Once you have paid the deductible, the insurance pays the rest. This is the most common type of home owners insurance deductible. It is easy to understand, and you can save the money you need for your deductible ahead of time, in case of an accident, theft, or natural disaster.

Setting The Deductible

The deductible on your home owners policy is set based on an agreement between you and your insurance provider. Your insurance provider will offer you a set of deductibles, or a percentage rate for the percentage based deductible, and a matching premium rate for each one. You then choose whether you want lower premium or lower deductible cost. Deductibles range anywhere from $250 to $5000 dollars per event. The higher the deductible, the lower the premiums. A good rule of thumb is to set the deductible at a rate you know you could come up with should you have an emergency.

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