Your home insurance deductible is the amount you will pay when it comes time to file a claim and before you are able to receive compensation. Since this is the key to a claim, it is crucial that you set your deductible at a reasonable amount. But how do you know how much you should set it at? What happens if it’s too high or too low?
What Type of Home Insurance Deductibles are There?
There are varying ranges of home insurance deductibles from $500, $1,000 and $2,000 and beyond. Different insurers and policies allow for different deductibles. Keep in mind that this is the amount you will be expected to pay out of pocket if you have to file an insurance claim.
For example, say your home is damaged due to a storm. You have the damage appraised by an expert and it amounts to $1,000. Your deductible is $500. This means you must pay $500 toward the repairs to your home before receiving compensation from your insurer for the remaining $500.
This deductible covers each part of your home insurance policy, including:
- Liability: Liability insurance covers claims of bodily injury and property damage you may face as a homeowner. For example, if someone is injured on your property, liability insurance can help cover their medical bills as well as protect you from a lawsuit.
- Dwelling: Dwelling coverage provides compensation for damages to your physical home and its attached structures due to fire, wind, hail, lightning, smoke, explosions, vandalism and more.
- Personal Belongings: Personal belongings coverage provides compensation for damages to your personal items such as clothing, furniture, decorations, etc. It covers against fire, wind, lightning, smoke, theft, vandalism and more.
What Happens if You Have the Wrong Deductible?
Everyone’s home insurance needs are different, as are their deductible needs. A lower deductible may mean higher premiums. Depending on your policy, lower deductibles may not be available. A high deductible can help save money on your monthly premiums, but it also means paying more out of pocket before you’re able to file a claim. You also run the risk of damages to your home insurance claim being denied.
Home insurance claims may be denied for a variety of reasons, but one of these reasons is that you did not meet your deductible. For example, say the damages to your home amount to $600 and your deductible is $1,000. Since you cannot meet your deductible, you will not receive the $600 in compensation.
Also Read: Should I Make Repairs to My Home Myself?
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