What is Deductible? Home Insurance Vocabulary.
A deductible is the amount of money included in an insurance contract that you are responsible for paying when seeking insurance coverage and before the insurance company will start processing your claim. It is the way in which risk is shared between you, the policyholder, and your insurer. In this case, you kind of reimburse yourself for your loss. The amount of money you paid is subtracted, or deducted, from your claim. Moreover, the larger the deductible, the lower the premium for an insurance policy. For example, if your policy includes a $500 deductible and your insurer had estimated your loss is worth $10,000, you would pay a $500 deductible before you receive a claim check for $9,500. Percentage deductibles are calculated based on the home’s insured value. So, if your house is insured for $100,000 and your insurance policy has a 2 percent deductible, $2,000 would be deducted from any claim payment. If the adjuster estimated a $10,000 insurance loss, you would be paid $8,000. In the event of a $25,000 loss, your claim reimbursement of $23,000.
How Much Is the Deductible?
As your insurance policy is regulated by the state, you should ask your agent about your state laws. Your deductible should be stated in the terms and conditions of your contract.
Who Decides How Much the Deductible Will Be?
As your insurance policy is regulated by the state, you should ask your agent about your state laws. Your deductible should be stated in the terms and conditions of your contract. However, you, the insured, usually can choose how much of a deductible you will pay. The higher the deductible is, the lower the cost of your insurance will be. As a consequence, the higher the amount of risk you are willing to take by being ready to pay the deductible, the less risk for the insurance company. Therefore, your premium is reduced.
Hurricane deductibles may apply for homeowner’s insurance claims living in hurricane-prone states. Hurricane deductibles are generally higher than other homeowner’s policy deductibles.
Wind/hail deductibles are usually covered by standard homeowner’s insurance.
Flood insurance offers various deductibles available in dollar amounts or percentages. The amount varies by states and companies.
Earthquake insurance usually offers percentage deductibles ranging from 2 percent to 20 percent of the roof replacement value of your home. The higher the risk of earthquakes, the less the deductible.