WEDNESDAY, FEBRUARY 28, 2024
There's usually a strong tug for homeowners to choose their insurance policy based on price alone. Even when you recognize the value of home insurance, the price comparison tools may reveal such an affordable number that you're tempted into the bare minimum. Here’s more about how this choice will impact your deductible, and how to make a more sustainable decision.
Two Types Of Deductibles 
The deductible is the amount you have to pay when you file a claim with your insurance company. For home insurance, you're likely to see two types of deductibles: either a percentage or a flat-dollar amount. Every owner's deductible will be different because it's based on the value of the home. After your numbers have been calculated though, they're fixed for the length of the policy. (So, even if the value of the home goes up, your deductible won't change.)
The Best One for You
The highest possible deductible can net you about 20 percent in savings when it comes to your insurance policy. But if you're going to take on the extra risk, you have to be certain you can afford it. This is because your deductible is applied for every claim (as opposed to per year). And this can become prohibitively expensive if you have to make several major claims in a short time span. When you're building your emergency funds, consider how long it would take for you to save up for the unexpected — as opposed to paying an extra 10 percent on your home insurance premium.
Check Your Policy
Many home insurance policies offer additional consideration to their policyholders, including covered meals and lodging while the home is under repair. However, there are limits placed on how much your carrier will pay for. If you've burned through your savings after paying the deductible, you could end up in a far more stressful situation. If you live in a particularly high-risk neighborhood, these are serious concerns that are likely to apply to you.
Choosing a deductible for your home insurance is all about understanding the financial risks attached to each choice. As long as you're ready to cover emergencies out-of-pocket, you can choose the highest deductible. However, most homeowners would prefer a little more cushion in case they're hit hard with the need for major repairs or emergency living expenses.
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