Homeowners insurance deductibles come as a flat rate or a percentage. What’s the difference between flat rate & percentage deductibles & what deductible total is best for you?
Here’s the difference between flat rate & percentage deductibles & how to choose…
Adulting 101: Flat Rate & Percentage Deductibles
In large part, most homeowners insurance deductibles are either calculated as a flat rate or a percentage of the value of your home being insured.
- Flat Rate Deductible: This is a set amount, such as $500, $1,000, or $2,000, that you pay out of pocket per claim.
- Percentage Deductible: This is based on an agreed percentage of your home’s insured value. For example, if your home is insured for $200,000 and you have a 1% deductible, your homeowner’s insurance deductible would be $2,000.
Historically flat rate deductibles are far more common than percentage deductibles. However, more & more carriers continue to add percentage deductibles as an option for their insureds.
Related… State Farm Insurance is leading the charge & providing percentage deductible options.
Deductibles From $500-$2000 +, What’s Best?
Each insured is different & needs to consider their unique situation. Consider the following when selecting a deductible…
- Affordability: A deductible is owed after something sudden & accidental occurs in your home. This means that the deductible total you choose has to be an amount you can afford to pay out-of-pocket at any time.
- Cost-Benefit Analysis: Generally speaking, a higher deductible will lower your premium. Alternatively, a lower deductible will increase your premium. You need to determine whether you are more comfortable with a higher unexpected total that you have in savings to pay if/when something sudden & accidental occurs. Or, if it works better for you & your finances to have a higher premium for budgeting purposes.
- Emergency Savings: Regardless of the deductible total you choose, this amount will need to be kept in your emergency savings if/when you make a homeowners insurance claim. What dollar amount do you have in your emergency savings account that you can afford to pay as a deductible? Share that total with your agent & see how that total will affect your insurance premium.
Making a Decision, Homeowners Insurance Deductibles
When making this decision remember that the deductible amount you agree upon is to be paid out of pocket when you make a homeowners insurance claim. For example, if you file an insurance claim that totals $5,000 in damages & your deductible is $1000, you owe $1000 & your insurance carrier owes $4,000.
It’s recommended that you request multiple quotes for various deductible amounts to determine the best value for you & your financials. You may want to consider requesting quotes from a captive agent that you have either worked with or have been referred to for a quote, & also an independent agent who writes for multiple carriers & can offer customizable options for you & your family including vehicles, boats, & motorcycles.
Remember, your situation is unique & there is an agent out there that has a unique solution for you.
If you are interested in an agent referral, please email us at info@wasitsuddenandaccidental.com.
