February 2, 2017

How to Choose the Best Homeowners Insurance Deductibles for Your House

When purchasing a home insurance policy, homeowners have a number of selections to make. Along with choosing the coverages, limits, and endorsements they want, homeowners must also select a deductible for their policy. If you’re looking for a homeowners insurance policy for a house in Lexington, Massachusetts, here’s a guide on choosing a deductible

Selecting a Homeowners Insurance Deductible That’s Right for Your Lexington, MA House

Deductibles Determine Homeowners Out-of-Pocket Expenses for Claims

Deductibles are kind of like limits, except they establish a lower range for potential claims rather than an upper one. Whereas limits generally determine the maximum amount that a policy will pay for a valid claim, deductibles determine how much a covered claim must cost before a policy will honor it. In other words, a deductible is the out-of-pocket expense that a policyholder must pay before an insurance policy will begin covering the claim.

If, for example, your Lexington, MA home sustained $400 worth of damage and your homeowners insurance deductible was $500, you’d likely have to pay the repair bill in full yourself. In this scenario, the loss incurred is less than the deductible.

If, in another incident, your home sustained $10,000 worth of covered damage and you had a $500 deductible your policy would likely pay $9,500. You’d still be responsible for the first $500, and the policy would pay the rest (provided the total value of the claim didn’t exceed its limits).

Homeowners Insurance Policies Offer a Variety of Deductibles

Most insurers offer several different deductibles that policyholders can choose from. Many people select either a $500 or $1,000 deductible for their homeowners policy, but these aren’t the only options. You may be able to secure a homeowners policy with a deductible anywhere from a few hundred dollars to $10,000 or more.

Sometimes home insurance policies’ deductibles are expressed as a percentage of the insured home’s value. For policies that use a percent-based deductible, simply multiply the percent by the amount of coverage the policy provides for the home. For example, a policy that had a 0.5 percent deductible and insured a $200,000 home would likely have the equivalent of a $1,000 deductible (0.5 percent x $200,000 = $1,000). A policy that insured the same home but came with a 2 percent deductible would be similar to a $4,000 deductible (2 percent x $200,000 = $4,000).

Choose a Deductible That’s Right for You

When selecting a deductible for your home insurance policy, there are a few considerations to take into account:

  • How much could you afford to pay out-of-pocket if you had a claim?
  • How low do you want your home insurance premiums?
  • Can you qualify for a discount if you don’t file a claim?
  • Will filing a claim increase your premiums?

It’s normally wise to select a deductible that you have the financial resources to cover if you need to file a claim, but there can be advantages to choosing the highest deductible you can afford. Selecting a higher deductible usually lowers a home insurance policy’s premiums, which leads to monthly savings. A higher deductible also will reduce how likely you are to file a small claim, which could disqualify you for a discount or cause your premiums to go up.

Work with an Insurance Agent Serving Lexington, MA

For help finding the right homeowners insurance deductible, contact an independent insurance agent in Massachusetts. They’ll be able to help you consider all of these factors and find a deductible that’s suitable for your Lexington, MA home. Once you’ve chosen a deductible, be sure to save up that much in case you ever have a claim and have to cover out-of-pocket expenses.

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