Homeowner's Insurance Deductible Explained!

How to Choose the Right Homeowners Insurance Deductible Explained

Homeowners insurance deductibles are an essential aspect of owning a home. With insurance owners select the amount of coverage they want to help protect their home and belongings, and the cost for this coverage is included in the monthly mortgage payment. While homeowners insurance is a common piece of the real estate puzzle, there are some components of the insurance coverage that are not so cut-and-dried.

The homeowners insurance deductible selected by the homeowner can change the financial responsibility of both the insurance company and the owner, as well as dictate the total cost of coverage over time. For these reasons, it is important to know how to choose the right homeowners insurance deductible from the start. Here’s what you need to know about your deductible.

Homeowners Insurance Deductibles

As part of each homeowners insurance policy, the insurance company offering coverage allows homeowners to select the deductible they prefer. A homeowners insurance deductible is the amount of money paid by the homeowner out of pocket when a claim is made. All other costs associated with a claim are paid by the insurance company, up to the policy’s limits.

To put a homeowners insurance deductible in real-life terms, think of it as the amount a homeowner must contribute to a financial loss due to fire, theft, or another disaster. For instance, if damage to the home took place and the insurance company estimated the repairs to cost $8,000, that amount would be covered by both the insurance company and you as the homeowner. With a $2,000 deductible, you would pay the first $2,000 related to the repairs and the insurance company picks up the remaining $6,000.

There are two types of homeowners insurance deductibles to be aware of as a homeowner. The first is a dollar-based deductible, which follows the example listed above. You select a dollar amount that you are comfortable paying from options provided by one of the best homeowners insurance companies.

The second type is a percentage-based deductible. With this option, you choose a percentage you are willing or able to pay should a claim be made against the policy; the insurance company pays for the remaining percentage of the claim. Homeowners pay the deductible, whether dollar- or percentage-based, each time a claim is filed for damage or loss.

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