homeowner’s insurance deductible is. Each homeowners insurance policy is going to have a deductible attached. What that means, is any loss that you incur you’re going to have to pay the deductible before the insurance company pays any of the benefits to you. This deductible can range anywhere from $500 all the way up to $5,000 and in some instances even more.i, today I’m gonna tell you what a
Many states you may also have a separate deductible for different types of loss. Maybe a separate deductible for hurricanes or water losses. I would check with your insurance company to see what your deductible is. Typically the lower your deductible, the higher your insurance premiums are going to be, and the higher deductible you have, the less you’re going to pay and insurance because you’re assuming more of the risk from the insurance company.
A quick example will make this a lot clearer to you, let’s say that I have a $5,000 deductible on my home insurance, and let’s further assume that an earthquake on my country and does $15,000 worth of damage. I have a $5,000 deductible, that means I have to pay the first $5,000 of that $15,000 damage cost, so the remaining $10,000 will be paid by my insurance company. I have chosen a $5,000 deductible, so out of that fifteen grand worth of damage to my house, I have to pay $5,000 and then my insurance company pays the remaining $10,000 of the damage. This is how a deductible works.
An insurance premium, on the other hand, is just the annual amount that you pay for your insurance. This is the check that you send to your insurance company each year, just to have an insurance policy. The average insurance premium for home insurance in the United States right now is about $650 give or take. This is gonna vary largely by where you live, and also by the amount of coverage you need.
The Insurance Deductible Vs The Insurance Premium
So, there’s an inverse relationship between the insurance deductible and the insurance premium. In other words, if you increase your insurance deductible with the amount that you have to pay and the event of loss, this will decrease your insurance premium.
This is something that a lot of personal finance experts recommend. And the reason is that you know you’re gonna have to pay your premium. This is just the required cost of coverage so you’re gonna have to pay this amount each year, but you don’t necessarily know if you’re gonna have to pay a deductible. If you have an insurance policy for ten years, and you don’t file any claims against the policy, then you will not have to pay for any deductible amounts.
Homeowner Tax Breaks
So that is why some people recommend increasing the deductible in order to recreate to decrease the premium amount. You can sometimes lower your premium by 25% or maybe even more just by increasing the deductible by a small amount.
So, if you went more than 4 or 5 years without making a claim, you’ve already paid for the difference and the pay in a high deductible by lowering your insurance premium by 25% or more. It sounds complicated, it’s really not you raise your deductible you lower your premium, you know you’re gonna have to pay a premium every year, but you may or may not pay a deductible. So, if you are more concerned about the annual costs of the premium and you want to lower that as much as possible. Then it’s probably in your interest to choose, a higher deductible amount in order to lower your premium.
This is the relationship between home insurance deductibles and premiums. I hope you found this article helpful. If you would like to learn more about the home buying process and some tips. Click more my article post.