A deductible is the amount you agree to pay before your home insurance kicks in to cover a claim. Deductibles apply per incident, not annually. A lower deductible may cost more in monthly premiums, while a higher one can lead to lower premiums but more upfront costs after a loss.

What Are the Different Types of Home Insurance Deductibles?

Not all deductibles work the same way. You should choose one that fits your budget and your home’s potential risks. The following are the most common options:

• Flat amount deductible is a set dollar amount you agree to pay before your insurance covers the rest of the claim. This fixed amount is applied each time you file a claim.

• Percentage-based deductible is calculated as a percentage of your home’s insured value. This is your share of any covered loss before the insurance pays the rest.

• Split deductibles use both methods: a flat dollar amount for some types of claims and a percentage-based deductible for others. For example, fire damage might require a flat amount deductible, whereas damage caused by vandalism could involve a percentage deductible based on the total loss.

• Disaster-specific deductibles are separate deductibles for specific events, such as earthquakes, floods and hurricanes. These are often state-specific and may be listed as percentages.

How Do I Choose a Home Insurance Deductible?

When choosing deductibles, you must first review your budget. Could you comfortably afford the deductible if you had to file a claim tomorrow? If so, a higher deductible may lower your premiums. Also, consider your home’s location and the likelihood of certain risks, such as storms or theft. If you anticipate frequent claims, a lower deductible might make more sense in the long term.

B.I.A. & Company can help you select a deductible that balances potential savings with your ability to cover unexpected expenses. Contact us today to learn more.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.