What Is A Homeowner's Insurance Deductible?
When you are shopping for homeowner's insurance, you will most likely notice that different insurance plans have different deductibles. What exactly is a deductible? In essence, it is the amount of money that you have to pay on your own before your insurance coverage will start paying toward the cost of any damages.
One of the easiest ways to understand it is by looking at an example. Imagine that you have a small fire in your home. The cost of repairs is going to be $5,000. Assuming that the type of fire that you experienced is covered by your homeowner's insurance policy, they will most likely contribute toward the cost of the claim.
However, before they start paying out, you have to pay an amount of money equal to the cost of your deductible toward the repairs out of your own pocket. In this case, let's say that your deductible was $1,000. That means that you have to pay $1,000 of your own money toward repairing the damage before the insurance will pay out any money toward the total cost.
On the other hand, if your deductible was $6,000, you would have to cover the entire cost out of your own pocket since you still would not have met your deductible by the time all of the damage had been paid off.
In general, the higher deductible you have on your insurance policy, the less expensive your monthly payments will be. This is because you are taking responsibility for paying a higher amount toward any damages that may occur.
Likewise, if you choose a plan with a low deductible, the monthly cost of your insurance will be much higher. This is because the insurance company is taking on more risk since they have to contribute more toward the cost of repairs on your home.
When you are shopping for homeowner's insurance, you should spend some time thinking about what level of deductible is right for you. Ideally, you will choose a deductible that is low enough that you can easily meet it if your home sustains any damage. A good practice is to put enough money in savings to meet your deductible. That way, if damage does occur, you can quickly pay your portion so that the insurance company will start paying on your claim.
Hopefully, this gives you a better idea of what a homeowner's insurance deductible is. If you still have questions about what deductible is right for you, you may want to talk to a qualified insurance agent. They can explain the concept in further detail and can help you determine the right balance between a low deductible and affordable monthly payments.
Although having to pay money out of your own pocket can seem like a major headache, as long as you are prepared, it isn't too big of a deal. That is why it is so important to have enough money in savings to meet your deductible so you don't have to worry about coming up with money on short notice.