If your home is damaged by storms or other disasters, chances are you will make a claim on your homeowners insurance to cover the cost of repairs. Unfortunately, some homeowners may not understand their policy or deductible fully and are shocked when told how much they must contribute to the final bill.
The confusion is understandable, just a decade ago most insurance claims worked similarly to other insurance types, like auto insurance, with set deductibles and clear terms so when a claim was made, most people knew exactly what to expect.
Homeowner’s insurance isn’t so clear cut anymore and every homeowner owes it to themselves to read their policies so when the time comes, you know what to expect.
Changes To Homeowners Insurance Deductibles Began Less Than 10 Years Ago
Around 2013-2014, Homeowners Insurance companies began moving away from flat rate deductibles to percentage based deductibles. Which one you have can vary depending on when and where you buy your insurance, it also differs from state to state as well as the choices you made when you closed (if you had a choice).
A flat rate deductible is easy to figure out, after all, when the time comes to make a claim, you know exactly what you are going to pay out. When it comes to percentage deductibles however, the costs aren’t always easy to figure out ahead of time, especially in today’s market where your home’s value can fluctuate from year to year.
Percentage Deductibles Are A Percentage Of Your Homes Value Not The Claims Cost
When people hear that they have a 1% or 2% deductible, many think of it like they do other insurance, as a percentage of the claim. However, when it comes to Homeowners Insurance, the percentage deductible is a percentage of your homes value, not the claim.
For some homeowners, the premium savings for having a percentage deductible can really add up, especially if you’re not making claims for many years. For others, especially on more expensive homes, this deductible can be quite high producing “sticker shock” to the homeowner who may not understand it applies to their homes value.
Understand Your Deductible Type & Plan Accordingly
Asking questions and reading your policy thoroughly will explain everything you need to know about your deductible. If you have a flat rate all you need to know is the specific amount, if a percentage, it will fluctuate as your homes value rises and falls.
Know which deductible type you have and if it’s a percentage, understand it’s of your homes value at the time of the claim and not the claim itself. Understanding this can avoid a real shock when it comes time to file your claim. Contact your insurance agent for any questions regarding your specific policy.