The Different Types of Home Insurance Deductibles

In most cases, your insurance deductible refers to the dollar amount you'll have to pay yourself before your insurance company covers the rest of the money for a claim. For example, if your insurance policy has $500 auto insurance deductible, that is the amount you'll be expected to pay from your pocket if you're found to be at fault in a car accident before your insurance company covering the remainder of costs for the claim.

However, in homeowner's insurance, it's not always quite that simple.

 Three Different Types of Home Insurance Deductibles.

1. The typical dollar-amount/ flat rate deductible.
2. A percentage-based deductible that majorly based on the insured value of your home.
3. A split deductible, which operates as a dollar-value deductible in most cases but will switch to a percentage-based deductible in particular scenarios, such as hurricane-related losses.

Generally, Percentage-based deductibles are considered higher than flat-rate home insurance deductibles. Commonly, homeowner's insurance deductibles range between $1,000 and $2,500 for dollar value-based claims and may be as high as 5 percent of the value of the insured property for policies that are percentage-based. That means that for a home with an insured value of $500,000, the homeowner will have to pay $25,000 before an insurance company comes in to cover the rest.

How Do Home Deductibles Work?

Some home insurance policies only use a dollar-value deductible, no matter what the situation. Others only use a percentage-based deductible. But some insurance companies primarily use dollar-based deductibles and only switch to percentage-based deductibles in particular circumstances.

How Should You Choose A Deductible?

When it comes to choosing a deductible for your home insurance cover, choose the highest deductible level that you will comfortably afford. This helps in keeping your premiums low. Choosing the lowest possible deductible may sound like the cheaper option, but it is likely to cost you considerably more over the long run, as chances are at the minimum that you will need to file a claim on a year-to-year basis.

How to Save Money on Your Home Insurance

If your home suffers the insured damage, the first thing you should do is making sure you can afford to pay your deductible.

Take a look at the monetary amount of coverage offered by your insurance policy. Does it factor in the value of the land your house is on? If it factored in that value, you may be paying more than you should, as the land your house is built on is not at risk of the same risks, according to the Federal Citizen Information Center. In this such a scenario, you should talk to your insurance agent about reducing the replacement value, and subsequently dropping your premiums and percentage-based deductibles.

Another way of saving money on premiums is by bundling different policies with the same insurer. If you have a homeowner's policy, a business policy, and two auto insurance policies, you can save as much as 15 percent by purchasing them all through the same insurance company.