Homeowners Insurance Deductible
A Deductible is what you have to pay out of your pocket initially before the insurance company is going to pay any money towards a claim.
Most insurance company’s offer a flat per claim deductible on your home insurance policy. The most common deductibles you see are $500, $1,000, $2,500.
What is a percentage deductible
Another deductible option that has recently made its way into the home insurance market specifically by one insurance company (who likes to be your good neighbor) is a percentage deductible.
This deductible is based solely on the dwelling coverage limit you have on the policy, which means it will fluctuate each year.
One thing we have realized when talking with other consumers is that they don’t realize what their deductible is or that they even have a percentage deductible.
This insurance carrier recently changed all homeowner’s policies automatically at renewal to reflect a percentage deductible.
How is a percentage deductible calculated?
We have found that depending on your claim history or length of time insured with this specific insurance carrier, the percentage used to calculate your deductible can vary.
The most typical percentages we have seen are .5% and 1%.
A policy with dwelling or building coverage of $200,000 that has a 1% deductible will leave you with an initial out of pocket expense of $2,000 per homeowner’s claim.
The problem with this, is homeowner’s policies have an inflation guard built into their policy. Which means the $200,000 in coverage will increase between 2-4% each year. This gives you the proper building coverage in the event of a total loss and you need to rebuild.
What this also does is increase your deductible.
After 5 years of inflation, your new Dwelling Coverage could be $240,000 in the above example. Again raising your deductible to $2,400. This has a direct impact on you the consumer.
What’s Next?
If you know you have a percentage deductible on your homeowner’s policy and are comfortable with it, then great.
What we find out from talking to homeowners is that they have no idea that they have this nor are they prepared to pay that amount in the event a claim happens.
If you are with State Farm for your homeowner’s insurance make sure you check your policy declaration page so you can verify what deductible you have.
If you want a review of your home insurance with a fixed flat deductible amount then click the button below to schedule a review with one of our trusted insurance advisors.
