When it comes to purchasing homeowners insurance, choosing the right deductible for your home may be a tricky decision.
There are many different types of deductibles and it is easy to get confused by the amount of options available to you. If you are stressing out over picking the right deductible for you, then this article will explain the different terms you may come across when making this vital decision.
Quite often, a property’s deductible is calculated not by its dollar value, but by a percentage value. The percentile value is calculated based on how much your property is insured for. If your property’s insured value is $100,000 and your deductible is 2%, then you would pay the first $2,000 of an insurance claim. The most important thing to remember when it comes to a percentage deductible, is that the dollar value changes in conjunction with any changes that occur to the insurance value.
Homeowners Insurance Split Deductible
A split deductible gives homeowners the option to designate a dollar value towards multiple types of hazards. For example, you may choose to pay the first $500 of any fire damage you incur, but only pay the first $300 as a result of vandalism or theft. This allows customers to prioritize on what damages they invest the most in. If you live in an area that is particularly prone to fire or hail damage, then you can opt for a higher deductible towards these potential hazards. Customers are given full flexibility in choosing the policy that is right for them. Resources such as the InsuranceTown.com website provide useful information in helping customers make the most suitable choice for their situation.
Flood Insurance Deductible
Flood insurance deductibles are generally not available as part of a standard homeowner policy. However, if you live in a potentially hazardous area, you can acquire a separate flood policy through one of many insurance companies. These policies are referred to as ‘NFIP’ contracts. In the event of an insurance claim, a small amount of the premium is handled by the insurance company, while the rest is then handled by independent adjusters. NFIP contracts also provide coverage for the cost of re-building damaged property. These include essential building materials, fixtures, machinery, tiles/floorboards and many more. The coverage of your personal items depends on each individual case and is established whilst your contract is being negotiated.
How Much Deductible Should You Pay?
The amount of deductible you pay depends on your circumstances and the type of policy you purchase. However, if you choose to pay a higher deductible, this will greatly reduce the amount of premium you will be liable for. If you are confident that you can pay for small-scale damages (between $250-$500), then increasing your deductible will mean that you pay less premium when a much larger-scale event occurs (any losses you incur that range from $1000 and above). Whichever way you choose to pay your deductible, it will ultimately influence how it affects your premium.
For those seeking the best deal for their homeowner insurance policy, these hints and definitions will guide you in the right direction. If you go online you will find sites such as the InsuranceTown.com website where you can get more information. The next time you are deciding upon a deductible for your property, remember these terms and you will be successful in attaining a policy that is right for you.
Author: Sam Fenton has extensive experience as an insurance consultant. He mainly writes for insurance and personal finance blogs where he enjoys sharing his insights.