What is a deductible?
There are many important coverages to consider when protecting your home. It is important to know what those coverages are and how they play a part in your policies. This way you can be prepared and know exactly what coverages you have, want, or need for your home. One of the main parts of your coverages you should fully understand are your deductibles.
What is a deductible?
A deductible is the amount the insured (you) is responsible for paying out of pocket in the event of a covered claim. After you pay your deductible, the insurance company will then settle payment for the remaining loss.
What are my deductible options?
Insurance companies have several options for your home policy, but keep in mind that each company can have different rules and choices for those deductibles. You can either choose a Flat Deductible or a Percentage Deductible.
- A Flat Deductible is a fixed dollar amount that you pay out of pocket each time you file a claim on your home. Common deductibles range from $1,000 to $15,000.
- A Percentage Deductible is calculated based on the insured value of your home (AKA your Dwelling Coverage AKA Coverage A).
- Here is a formula for how the deductible is calculated:
Dwelling Coverage x Deductible Percentage = Deductible $ Amount
e.g. Dwelling Coverage: $321,275 using common deducible percentages:
– 1% Deductible: 321,275 x .01 = $3211.75
– 2% Deductible: 321,725 x .02 = $6423.50
– 3% Deductible: 321,725 x .03 = $9651.75
How do I choose my deductibles?
You should choose your deductibles based on your risk tolerance and what you would be comfortable paying out of pocket. If you are willing to take on more risk and have a higher deductible, then your premium should reflect with a lower price. If you want to air on the side of caution and not pay as much out of pocket in the event of a claim, you will go for a lower deductible. Of course, this would then increase your overall premium.
It is important to understand your deductibles and how they can affect you and your policy. If you ever have any questions or would like to discuss your coverages, our team at Ryan Everet are happy to assist you! Call us at 940-268-5112 or complete a quote request form on our home page to get started.