5 Things to Consider When Choosing Your Home Insurance Deductible
We have all heard horror stories of theft and fire that have left homeowners financially devastated. Many homeowners choose basic policies with very high deductibles thinking the unthinkable will never happen to them. Choosing an appropriate level of coverage and deductible is crucial to your recovery. Below we have listed five things to consider when choosing your home insurance deductible:
- Choosing a high deductible: While the annual cost of a high deductible for a homeowners policy results in a lower cost, the homeowner may be left to replace many items at their own expense. Saving up to 37 percent sounds great, but leaving a large portion of your possessions not covered may not be enough to get you back on your feet after a disaster. If the homeowner can put aside the one to five percent of the home’s value needed to replace your home and possessions, it may be okay to choose a higher deductible. A vital factor to remember is that you are insuring the cost of rebuilding your home, not the current market value of your home
- Geographical location: When writing a homeowners policy, your agent will consider your geographical location. Do you live near the coastline? Are you a city dweller living in a known high-crime area? Are hurricanes and tornadoes more likely to strike your area? What is the proximity of your home to a fire station and fire hydrant? The insurer has to consider these factors that may leave the homeowner open to one or more claims before offering a homeowners policy. Your geographical location is a huge factor for any insurance company to consider when writing a homeowners policy. To accurately gauge your coverage, the policy holder needs to consider all geographical factors before choosing a deductible that could leave them shouldering a huge bill or many bills.
- Your home: Replacing building materials will vary depending on many factors including the current cost of the building materials needed to be replaced, and the square footage, geographic location, and age of your home. Smoke detectors, fire extinguishers, and deadbolts are all additional safeguards the insurer needs to tell their agent they have for an appropriate level of coverage. Consider the cost of replacing all building materials, furnishings and possessions inside and out at today’s cost before choosing an appropriate deductible.
- Inflation: While your insurance agent can’t see into the future they will try to keep your homeowners policy in line with inflation. Let your agent know of any changes made to your dwelling to ensure you have the proper amount of coverage. Review your policy annually to see if the deductible and coverage you currently carry on your homeowners policy will sufficiently cover the cost of rebuilding or replacing all of your items at today’s prices. Update your deductible accordingly.
- Extra coverage endorsements for your personal property: If you have invested in pricy jewelry, antiques, an expensive home, fine furnishings or are an art connoisseur, you need to consider replacement cost and deductibles of these types of items before choosing or amending a homeowners policy. Make sure to have all your personal possessions professionally appraised, videotaped, and stored appropriately. Always be sure to give your homeowners insurance agent copies of all appraisals to ensure adequate coverage.