Types of Deductibles – Homeowners Insurance
With a lot of weather-related damage occurring in our region lately, it’s important to review your home and other property insurance policies to make sure you understand what would be covered in the event of a claim. In addition, it will save you some frustration if you already know about any deductibles you have and how they might apply in a claim situation.
A deductible is the amount that will be deducted from the insurance company’s claim payout. Think of it as cost-sharing with the insurance company, where you’d pay the deductible amount out-of-pocket and the insurance company pays the rest, up to the policy limit.
Let’s suppose you have a $1,000 property deductible on your homeowners insurance. A small kitchen fire causes about $2,500 worth of damage to your home and the insurance company determines that they will cover the loss. In this instance, the insurance company would pay out a total of $1,500 ($2,500 minus the $1,000 deductible). You would be responsible for the remaining $1,000.
Most of the time, your homeowners insurance policy will have a flat dollar amount deductible. For instance, it may be $500, $1,000, or more. This is usually straight forward, like our example above. However, your policy might also include a Wind and Hail Deductible. This may be listed as a percentage instead of a dollar amount, where your deductible would be a percentage of the property or dwelling limit. Most of the time, you will see a small percentage such as 1%. At a glance, it may not look like a lot, but when you do the math, it can be a substantially higher deductible that what you anticipated.
Let’s say you had a 1% Wind and Hail deductible on your homeowners policy and you have a $350,000 dwelling limit. Your Wind and Hail deductible would be $350,000 x 0.01 = $3,500. If a nasty windstorm rolls through and causes substantial damage to your home, you would be responsible for $3,500 worth of the damage and the insurance company would pay the difference, up to your policy limits.
It’s important to review your policy to ensure that it covers your assets the way you had intended. If you have questions about your deductible or if there are options to change it, your insurance agent is available to help.
Our agency is also available to review your homeowners program and look for other options. As an independent agent, we have access to numerous markets and will strive to find a competitive, comprehensive solution for you. Please don’t hesitate to reach out with any questions!