How to Choose Your Homeowners Deductible
Consider this, if you have a lower deductible, you’ll pay less out of pocket in the event you file a claim. But you’re guaranteed to pay more in premiums over a longer period of time. If you have a higher deductible, you’ll pay more if you have a covered claim, but your premiums will be lower each month.
When choosing your deductible amount, compare what you can reasonably afford in the short term versus the long term. And consider what your annual household income is as well as other out-of-pocket expenses you’ll be expecting during the year. Choosing your deductible comes down to what you personally can afford in the short term or long term.
Many people opt for a higher deductible since this lowers the guaranteed amount they pay for their premium, whereas the deductible would only be paid if they file a claim. If you do choose a higher deductible, consider setting aside money specifically to cover your deductible in the event you have to file a claim. This way you’re financially prepared and not emptying your savings account that you planned on using for other emergencies.
What is the standard homeowners insurance deductible?
Typically, homeowners choose a $1,000 deductible (for flat deductibles), with $500 and $2,000 also being common amounts. Though those are the most standard deductible amounts selected, you can opt for even higher deductibles to save more on your premium. Again, it’s what you can reasonably afford to pay given you file a claim and have to pay out of pocket.
Home insurance deductibles apply for every single claim you make, no matter how many you make. For example, if you have a $1,000 deductible and you make a claim for a branch that went through your roof during a storm, which costs $3,000 to fix, you would still have to pay $1,000 out of pocket, with your insurance company covering the other $2,000.
When do you pay the deductible for homeowners insurance?
When you file a home insurance claim and it’s accepted, you’ll receive a settlement amount, minus your deductible. If your settlement amount is lower than your deductible, however, then you wouldn’t file a claim at all and instead pay out of pocket. Even if you think damage to your home might cost less than your deductible to fix, you should still contact your insurance agent to help get an estimate.
Some kinds of claims are typically exempt from the deductible or have a lower deductible applied to them, like scheduled personal property coverage claims or the Fire Department Service charge, but your standard homeowners insurance deductible will apply to most any claim you make.
How does your deductible affect your homeowners insurance premium?
The amount you choose for your deductible directly affects the amount of your insurance premium. Setting a high deductible results in a lower premium, which are your known out-of-pocket expenses. But you do run the chance of paying a higher, unknown expense. The lower you set your deductible, the higher your premiums. But if you file a claim you’ll pay less out of pocket before the insurance company covers the claim.
Filing multiple claims over a short amount of time can affect your home insurance premium or even cause your policy to not be renewed, so take into consideration what you can pay on your own before filing a claim.
The good news is, no matter how high or low you set your deductible, there are plenty of ways to save on your home insurance! From having smart home features to going paperless, learn about ways to save with our home insurance discounts.Want to learn more about your home insurance deductible? Connect with yourAmerican Family Insurance agent — they’ll guide you through your home insurance and help determine the best deductible for you.
This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsem*nts, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance.
