Homeownership entails numerous responsibilities, one of which includes navigating the world of insurance policies and the subtle nuances within them. Central to understanding your homeowners' insurance policy is a mastery of the different types of deductibles: Standard and percentage deductibles, each catering to other aspects of coverage.
Standard deductibles
Standard deductibles are fixed amounts, typically from $500 to $2,000 and more, representing what you'll pay out-of-pocket for most insurance claims. Regardless of the damage cost, this amount remains constant. However, specific claims are more peculiar and necessitate a different kind of deductible known as the percentage.
Percentage deductibles
Percentage deductibles primarily apply to claims related to wind, hail, and hurricanes, calculated as a percentage of your home's insured value, usually between 1-10%. For instance, for a home insured for $400,000 with a 1% deductible, any claim would require a $4,000 payment out-of-pocket before insurance covers the remaining cost. If you opt for the higher percentage, you can see how quickly this type of coverage can get expensive if something happens to your home.
Disaster deductibles
Beyond the regular realms, there are disaster deductibles. Standard policies typically do not cover natural disasters like earthquakes, mudslides, and sinkholes. The deductibles for these are also percentages of the insured value, with areas prone to specific disasters having higher minimum percentage deductibles, like most California homes having around 15%. In regions like Florida, sinkhole coverage is mandatory due to the prevalence of ground cover collapse.
Flood insurance
Flooding is another peril not covered under standard policies, necessitating additional coverage, especially for residents in high-risk flood areas. Flood insurance, available through the National Flood Insurance Program (NFIP) and private insurers, offers two types of deductibles: Building damage and content damage.
Choosing the right deductible involves balancing short-term and long-term costs, assessing financial resilience, and understanding how deductibles impact premiums. Premiums, the periodic payments made to maintain coverage, are influenced by risk levels set by insurers based on factors like construction, age of the home, and regional claims history.
It's crucial to note that filing claims may increase premiums, regardless of the deductible amount. The nature of your claims, frequency, and the cumulative cost to the insurer are crucial factors in determining future premium costs.
All this being said, you do have help. Your favorite restoration company is your expert on disaster restoration and working with your insurance company to get you back to normal. After all, it pays to call a pro!