Turns out Goldilocks was on to something — being choosy can pay off, especially when it comes to your home insurance deductible. We'll explain your out-of-pocket options, and how they could impact your policy and finances.
homeowners insurance deductibles: explained
When you file a claim, you pay a fixed dollar amount out of pocket, called a deductible, before home insurance kicks in.
For example, say your policy has a $500 deductible. A lightning strike during a storm causes a fire, resulting in $10,000 in damages (ouch). To pay for the repairs and replacement, you'd pay $500 out of pocket (the deductible), and insurance would pay the remaining $9,500.
However, when dealing with personal liability or medical payments claims — for example, if a visitor tripped on your stairs and sued you for the injury bills — there is sometimes no deductible at all. It's always wise to talk with your insurer ahead of time to find out exactly when you'll be asked to pay a deductible under your policy and when you won't.
choosing a homeowners insurance deductible
Most covered risks fall under the same deductible, often called your "all-peril deductible." This means that whatever happens — be it property theft, water backup, kitchen fire, etc. — you pay the same fixed, out-of-pocket amount, and your coverage handles the rest (up to your limit).
While the concept is simple, choosing the right homeowners insurance deductible for you can be anything but. Get help steering the course by learning the pros and cons of your potential payment.
The case for a higher deductible
A higher deductible, of say $1,000, means more money coming out of your wallet after a covered incident, which seems like a bad thing, right? Not necessarily.
Raising your deductible could lower your monthly premium by as much as 20 percent, making it a simple way to potentially save some cash. Think of it as a reward in the here and now for accepting more financial responsibility down the road should an incident occur.
Plus, with a higher deductible in place, you might refrain from filing minor claims (since you'd be footing the cost anyway). This could help keep your insurance track record clean and even aid you in qualifying for perks like a Claim-Free discount.
Keep in mind, jumping at the chance to lower your premium by raising your deductible can be shortsighted, especially if it means being left vulnerable later on. However, if you're a responsible, financially secure homeowner with a relatively low-risk home and lifestyle, you might feel comfortable going this route.
The case for a lower deductible
On the other hand, choosing a $500 deductible (as opposed to $1,000) can be a great way to go, too. Although your premium tends to be a smidge higher, you're essentially agreeing to pay a couple more bucks a month now to avoid a bigger hit to your savings if something bad does happen.
If a major storm levels your house or you arrive home to find a burglar has cleaned you out, a hefty out-of-pocket payment can feel like salt in an open wound. On the other hand, knowing your homeowners coverage is taking care of almost all the costs can be a welcome comfort during a stressful time.
If your appetite for risk is low or you have a history of homeowners claims or incidents, choosing a lower deductible could be a way to alleviate a bit of life's uncertainty.
a word on wind and hail
While your all-peril deductible kicks in for most risks, 2 common exceptions are wind and hail. Some insurers, including Esurance, have a separate deductible for damage caused by these weather-related perils. When choosing a wind and hail deductible, you can use the same reasoning as above to land on an amount that makes sense for you.
choose (or change) your home insurance deductible
Speak with our licensed agents or get a free homeowners insurance quote to tailor a policy around your unique home, including setting a deductible that makes you comfortable.
And if you already have an Esurance policy, you can log into your account at any time to adjust your home insurance deductible as you see fit.
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