Homeowner’s and renters insurance include a deductible. You’re responsible for covering the deductible out of pocket before the insurance coverage kicks in to cover the rest. A high deductible means that you pay more if damage occurs but are likely to get a lower premium.
The Basics of Home Insurance Deductibles
Deductibles are a part of most homeowner’s and renters insurance policies. When you file a claim, insurers deduct the deductible before sending you payment for the covered damages.
For example, if you have $5,000 in damages and a $500 deductible, the insurance company sends you a payment of $4,500.
The amount that the insurer pays depends on the limit on your policy. The typical standard homeowner’s insurance policy includes a limit of $300,000 to $500,000 for liability coverage.
The limits for dwelling coverage are often at least 80% of the home’s replacement value. Limits for other types of coverage can vary depending on your individual needs, but they rarely exceed the limit set for liability coverage.
What Is the Standard Deductible for Homeowner’s Insurance?
The average deductible for homeowner’s insurance is about $500 to $2,500. However, deductibles can be much higher.
Some insurers set the deductible to 1% or 2% of your home’s value. For example, if you have a $300,000 home, your policy could include a $3,000 or $6,000 deductible.
What Types of Home Insurance Coverages Have Deductibles?
The following types of coverage typically include deductibles:
- Dwelling coverage
- Personal property coverage
- Other structures coverage
These coverage options pay for repair or replacement when your home or personal property is damaged.
The following coverage options generally don’t have a deductible:
- Liability coverage
- Loss of use coverage
- Medical payments to others
- Insurance riders
Liability and medical payment coverage include coverage for medical bills and other expenses if you or someone else gets injured on your property. Instead of subtracting a deductible, the insurance company pays up to the limit of the coverage.
Are Deductibles Different for Renters Insurance?
Deductibles for renters insurance policies work the same as deductibles for home insurance policies. After you file a claim, the insurance company pays an amount equal to your policy’s limit minus the deductible.
How to Decide on the Right Deductible
Insurance companies often allow policyholders to choose a deductible that fits their budget and specific needs.
To choose the right deductible, you should first decide whether you want to spend less on repairs or insurance.
With a higher deductible, you pay less for insurance but need to cover more of the expenses out of pocket. For every $500 that you increase the deductible, you may save close to $100 annually on your insurance premiums.
You should also ensure that the deductible is a good match for your financial situation. If you file a claim, you may need to cover the deductible to ensure that you have enough funds to repair or replace your home or other property. With a large deductible, you get less from the insurance company to cover the assessed damages.
Conclusion
If you plan on getting homeowner’s or renters insurance, you’ll need to choose a deductible. This is the amount that you’re responsible for covering when filing a claim.
Remember to choose a deductible that you can afford and that suits your preferences. If you decide on a lower deductible, expect to pay more for insurance.
