When you buy insurance the deductible is the portion of a loss that you will pay. So, when you purchase renters or home insurance, your property deductible is that portion of a claim that you pay to help repair your home or replace damaged or stolen property. For example, if you have a $1,000 property deductible and there is a $5,000 claim for damage —you would pay $1,000 and the insurance company would pay $4,000. Renters, dwelling fire (landlord protection), and homeowners insurance all work the same way.
Your renters or home insurance deductible will be applied per claim, no matter how many you have per year. It does not apply to personal liability claims. Also, the insurance company only pays for the portion of damages above your deductible. Therefore, losses under your deductible would be entirely your responsibility. For instance, if you select a $1,000 deductible and have a loss for $500, you pay for all the damages to be repaired.
The higher the deductible, the lower the premium. Higher deductibles cost less because you will be electing to retain more of the risk. Therefore, by selecting a higher deductible, you are agreeing to pay more out-of-pocket costs per property claim. As a result, you’ll have a lower overall premium. The lower the deductible, the higher the premium, and the less you’ll pay per claim. It’s simple.
The deductible will function the same way regardless of the size of the loss. For instance, if your home burns down in a fire and you lose everything, the insurance company will pay for the repairs and replacement of personal property, less your deductible. If you have a small water loss, the insurance company will behave the same way, paying for the repairs less your deductible.
Most claims under a renters or home insurance policy relate to property, so most claims will have a deductible. However, claims for personal liability, which covers you if someone sues you for injuries or property damage, do not have a deductible. Furthermore, if you schedule valuable item for coverage above the policy sub-limits, or have to purchase a personal article floater, you won’t have a deductible. Note, some do allow deductibles on scheduled items as an option, but don’t make it mandatory.
Get an insurance quote online, and see for yourself how a property deductible changes the premium.
When you buy a home or renters policy, you will be able to select from a range of deductibles. Deductibles for home or renters insurance typically range between $500 – $5,000. While not common, some insurance companies allow you to select a percentage – this is not recommended. For a renters policy, the most common deductible is $500, and for home insurance it’s $2,500. Her are a few strategies to employ when selecting a property deductible.
1 | Pay less for premium or per loss?
When you select a higher deductible the premium charged is lowered. So, by selecting a higher deductible you can save on monthly or annual premiums. However, if you don’t have the disposable income or money set aside, you may not have enough to pay your share of a loss when it happens.
2 | What can you afford to pay?
Rule of thumb, your deductible should never be more than what you can afford to pay. Sure, it’s tempting to take a large deductible to save money, but that’s like gambling. You’re playing a game of probability and betting you wont’ have a loss. This could leave you with unrepaired damages or worse.
The property deductible is one of several choices you need to make when buying renters, landlord or home insurance. It’s important to select your deductible based on what you can afford as well as the potential for savings.
If your aren’t sure what’s right for you, or simply want to explore your options, consult an insurance agent. Most will be able to provide you useful strategies and even shop the market for you. If you don’t have an agent, give us a call at (877) 334-7646 or get a quote online and we’ll gladly assist.
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