Damage to your home from a raging storm is a stressful event. The last thing you need is more surprise expenses before you even get to an estimate but it happens all the time. Largely due to the way some homeowners view deductibles, thinking homeowners insurance deductibles work like most other deductibles like car or health insurance.
The confusion is understandable, just a decade ago most insurance claims worked similarly to those other insurance types with set deductibles and clear terms so when a claim was made, most people knew 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
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, these may lower your premiums a bit but need to be calculated when you make your claim.
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 car 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.