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Understanding Homeowner’s Insurance Deductibles

When applying for home insurance, it is inevitable that the discussion will eventually turn to deductibles. A term fairly commonly recognized, but often not fully understood. Being aware of what deductibles are and how they will affect your policy will given any client a leg up when searching for home insurance. The fact is there are several different deductible options that can be applied. And in most cases, it is the client who has the final decision on what deductible will be used. When that time comes, it is best to be prepared.

So what is a home insurance deductible? A deductible is a predetermined monetary value that a client is willing to pay to have an insurance company begin repairing damage. For instance, if a fire causes $10,000 in damage to a home and the deductible is set at $1,000, the client must pay $1,000 out of pocket before the insurance company will repair the remaining $9,000. In limited circumstances the deductible can simply be subtracted from the coverage amount being paid to a client. However, it is often best practice to choose a deductible based on the assumption that the money will come directly out of pocket.

Deductible amounts will vary by insurance company and the location of the home. The most commonly used deductible election process will simply involve the agent offering a range of dollar amounts the client can choose from. These can range from $500 to $10,000, again depending on the insurance companies options and the requirements of the location. Generally speaking, higher deductibles will offer lower insurance costs. However, this also means more out of pocket money if a claim were to occur.

Some companies on the other hand, will offer percentage deductibles. Offering clients a range of deductibles based a percentage of the home coverage offered. For example, if a home is insured for $300,000 and a 1% deductible is in place, the client would be responsible for coming up with the first $3,000 before the claim can be filed. These percentage options can range from 0.5%-5%.

In additional to choosing the amount of the deductible to be used, it is important to know if a home policy is providing a single or split deductible option. In some cases, companies will offer a slit deductible option which will allow clients to choose an “All Peril” deductible and a “Wind/Hail” deductible. All peril deductibles include coverage for loses such as theft, fire, and water damage amongst others. A wind/hail deductible is set specifically for a loss arising from wind or hail damage. While a single deductible is most common, but separate wind/hail deductibles can be required in areas that experience regular high wind (tornados, hurricanes, etc…) or heavy hail accumulation.

As seen, deductibles affect a wide variety of your insurance policy. From coverage, to policy cost, and possibly the amount of money it will cost you to have your home repaired. Understanding what you are selecting will make your insurance policy as well as the buying process much more productive.

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Allied Insurance at The Insurance Loft

1630 Welton St. Ste. 202
Denver, CO 80202
1 (888) 688 1446