Deductible

With any insurance policy, a deductible is the amount of the covered loss that the insured must pay out of pocket. In other words, a homeowner must meet his/her deductible before the policy benefits go into effect. For example, if a homeowner filed a claim for a loss of $3,000 and had a deductible of $1,000, the insurance company would pay the policyholder $2,000 in benefits. Deductibles are intended to mitigate the insurer’s risk and distribute the financial responsibility for losses.

Benefits of High Deductibles

Higher house insurance deductibles mean that the insurer will not have to pay out as much money in the event of a loss, which in turn reduces their risk in issuing coverage. This reduced risk allows the insurer to charge the homeowner lower premiums. In other words, as house insurance policy deductibles go up, premiums go down. Homeowners can save substantial amounts of money on their annual premiums by setting their deductibles as high as they can afford. Moreover, high deductibles are a deterrent for filing claims excessively, which will also help keep premiums affordable.

Benefits of Low Deductibles

Low deductibles ensure that you will be able to pay the out-of-pocket portion of your claim in the event of a loss. You will not have to face the stress of avoiding filing a claim because your deductibles are too high. With some insurers, policyholders can choose deductibles as low as $0-$100. On the other hand, extremely low deductibles are usually paired with very expensive premiums. Your best bet is to set your deductibles at the highest level you can comfortably afford and then save the difference in the premiums.