What is a home insurance deductible?

  • A home insurance deductible is the part that you pay on a claim. It is deducted from your payment.
  • The standard home insurance deductible is $ 500 to $ 1,000, or it can be based on a percentage.
  • Your deductible may vary for standard homeowners compared to flood and earthquake insurance.
  • Check out the insider’s guide to the best home insurance companies.

Home insurance protects your home and personal effects, and provides liability coverage for injuries that occur on your property. The damage must be caused by an insurance risk, an event that can damage your home or property, such as theft, fire, or storm.

If your home or property is damaged by insurance risk, you will need to pay a deductible.

What is a home insurance deductible?

A deductible is the amount that the insured must contribute to a loss claim. The excess is subtracted or deducted from the payment of your claim.

Your deductible can be a dollar amount or a percentage. The Insurance Information Institute has noted that the standard homeowner deductible is generally between $ 500 and $ 1,000. The statements page of your insurance policy will show your deductible amount and whether it is a percentage or a dollar amount.

Your deductible applies each time you make a claim and only to property damage (home and personal property insurance), not to liability coverage.

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If you have a dollar amount for your deductible, it will be deducted from your claim. For example, let’s say your house is damaged by a storm and the insurance company calculates your loss at $ 15,000 to repair the damage. If your deductible is $ 500, the insurance company will pay you $ 14,500.

If your deductible is a percentage, like 2%, then that amount would be deducted from your claim. If your home was insured for $ 500,000 with a 2% deductible, you would have deducted $ 10,000 from each Claim. For example, if you have a loss of $ 15,000, the insurance company will deduct $ 10,000 from your loss and pay you $ 5,000.

A higher deductible can lower your annual premium

According to the National Association of Insurance Commissioners (NAIC) Home Insurance Report, the average annual home insurance premium in the United States in 2017 was $ 1,211. One way to lower your premium is to increase your deductible amount.

Having a deductible greater than $ 1,000 reduces your annual premium. However, if you experience a loss and make a claim, more will be deducted from your payment. This is an important consideration if your home is located in weather or disaster prone areas – flood zones, hurricanes, tornadoes, forest fires, mudslides, hail, and earthquakes – where you may have multiple claims in one. year.

Other types of home insurance deductibles

In addition to your standard home insurance deductible, there are other deductions for storm insurance riders, flood, hurricane, and earthquake insurance.

Flood insurance deductibles

Flood insurance is in addition to your home insurance policy to cover flood damage. Flood insurance is mandatory if you are in a high risk flood area. The Insurance Information Institute said that flood insurance deductibles vary by state and insurance company, and your mortgage lender may have specific requirements for your flood deductible.

Storm insurance deductibles

Tornadoes and hurricanes produce wind and hail. Wind and hail are named as insurance risks in standard home insurance policies. However, most insurers require an additional high coverage windstorm rider and a separate deductible if you live near coastal areas or a “tornado alley”. The Insurance Information Institute said wind / hail deductibles are typically 1% to 5%.

Earthquake insurance deductibles

Earthquake insurance, also known as “earth movement” coverage, is a separate coverage. FEMA has earthquake hazard maps that show the intensity and likelihood of seismic activity across the country. The Insurance Information Institute said that earthquake insurance deductibles range between 2% and 20%, with an average of around 10%. For California residents, the California Earthquake Authority (CEA) offers coverage and deductibles vary depending on the coverage chosen.

When purchasing home insurance, be sure to ask your agent about the different deductibles.

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