Home Insurance Articles
How Raising The Deductible On Your Home Insurance Policy Affects Coverage
2010-04-06
A home insurance policy is a necessity for any homeowner. If your home is mortgaged, your bank or other lending institution will likely insist on a reputable insurance provider, but even if you own your home outright, neglecting to purchase home insurance coverage can lead to serious problems in the long run. While the hope of every homeowner is to pay for but never use their home insurance policy, it is likely that during the life of their home they will be required to at least once, perhaps due to a break-in or vandalism, or, if they are extremely unfortunate, a fire or flood. Often, claims on your insurance can cause your rates to increase. One way to avoid this is to consider raising the deductible on your home, but many homeowners question what this may do to their coverage.
The short answer is nothing. Raising a deductible will not affect the amount of home insurance coverage that your policy provides, unless you call and specifically ask for that to be the case. Raising the deductible simply requires the homeowner to pay more out of pocket before the insurance company will step in and begin contributing their own money. An excellent example of this is a severe weather home insurance policy. In a state with the potential for severe windstorms or hurricanes, extra wind coverage may be available form local providers. If purchased, a homeowner is permitted to choose their deductible from a variety of options. Typically, the deductible will be based on a percentage of the value of the home. Homeowners will have option to choose a 1%, 2% or 5% deductible to pay before the insurance will being paying their portion of the cost.
A higher deductible is sometimes referred to as a "limitation of coverage", but that is a misnomer. The amount of coverage offered by your policy does not change, regardless of the deductible selected. The reason it is perceived this way is because it takes more out of pocket money to begin the insurance process. In fact, raising your home insurance coverage deductible can help to lower your premiums, as an insurance provider will view your home as lower risk, since they will have a lower likelihood of having to pay out.
Although raising a home insurance policy's deductible is not for everyone, as it can cause a significant financial hardship at a time when money is tight and stress is high, a bigger deductible does not limit your coverage and can in fact lead to a lower monthly insurance rate. Speak to your insurance provider to see what type of deductible options are open to you, and how they will affect your bottom line.