How To Choose a Homeowner’s Insurance Deductible

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When you are purchasing a house a mortgage lender will require you to secure a homeowner’s insurance policy typically from a insurance agent of your choice. They want to ensure a policy is in place in case of any type of typical casualty loss which may occur. The expense for such a policy depends on the value of the home, the level of coverage for the structure and its contents and the level of the deductible selected.

First, we need to understand what a deductible is. The simplest explanation is the amount of money that the homeowner needs to pay out of pocket first before the insurance policy pays the rest. The money you pay is deducted from the amount the homeowner’s insurer pays and your deductible payment is made to the person or company making the repairs.

Homeowner’s deductibles are made on every claim that you make. Also, the more claims you have the higher likelihood your insurance premium will increase upon renewal.

Also, typically, the higher you set your deductible, the lower your insurance premium will be for the year. Standard deductibles on homes are $500 and usually come at levels of $1000 or $2000.

Most homeowner’s policies do not cover earthquakes and flooding. If you are in an area where there is a possibility of a flood or water backup, you will need to add this level of coverage as a rider to the policy.

The best advice is to find a trusted insurance agent who can answer your questions and recommend what may be best for your home and situation.