What Is a Home Insurance Deductible and How Does It Affect Your Premium?

Home insurance can help account for many types of losses and damages following various incidents and unexpected events. However, while your premiums already represent regular payments through which you maintain your coverage, they’re not the only contributions you may need to make toward covered losses. Even if an incident or peril is covered by your home insurance, you may still need to contribute a certain amount out of pocket. This part of your policy is called your deductible.

How Do Deductibles Work?

Many types of policies, such as home, auto and health insurance, include deductibles. These clauses establish minimum out-of-pocket amounts you’re responsible for contributing toward covered losses before your insurance carrier will begin to assist with remaining costs. For example, if you have a $1,000 deductible in your home insurance policy and a fire inflicts $5,000 worth of damage, you’d need to contribute $1,000 toward your losses. Your insurer could then potentially issue $4,000 in aid.

In some cases, deductibles may be based on a percentage of your home’s total value or coverage limits. These arrangements may be particularly common if your policy covers named storms, such as hurricanes. If your home is valued at $500,000 and you have a 2% deductible, this would mean that you’d be responsible for paying $10,000 out of pocket for covered losses.

How Do They Impact Premiums?

As a general rule, a lower deductible will incur higher home insurance rates and vice versa. When you have a higher deductible, you’ll likely be paying more toward covered losses, lessening the financial burden for your insurer. As such, you may enjoy lower premiums.

Additionally, you might consider your deductible when choosing to file a claim in the first place. This decision could also impact your premiums. For example, if covered losses from a relatively minor incident don’t exceed your deductible or do so by a small amount, it may not be worth it to file a claim. You’d potentially be paying most of the costs out of pocket anyway and would now have a claim on record that could impact your perceived risk levels upon renewal or while shopping for other coverage.

Learn More

If you’re a homeowner in Houston, TX, contact Amco Auto Insurance today to discuss your home insurance deductible.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.