Your homeowner insurance deductible determines the amount you as the homeowner have to pay from your own funds in case there is damage to the property and you submit a claim. It is called ‘deductible’ because this amount is normally deducted from the total amount of the claim.
It’s not as simple as you may think
Home insurance has huge benefits. But when you compare the policies of different companies, it’s important to make notes of exactly what you are signing up for. Here are a few potential pitfalls when it comes to home insurance deductibles.
Lower deductibles may not be as nice as you think
The lower the deductibles, the higher the premium will normally be - and vice versa. Be warned that many companies offer what appears to be very low premiums, but the deductibles are so high that you might just as well pay for everything yourself. On the other hand, it’s better to opt for a lower premium than to go without home insurance. Technically it’s possible to have an uninsured home, but it can turn out to be financial suicide.
Deductibles are normally per claim
Normally you have to pay the deductible every time you submit a claim. If a house fire, however, damages your home’s structure and also some personal property, that is not regarded as two separate claims, so you will only pay one deductible. And if you live in the state of Florida, you will typically not have to pay a hurricane deductible more than once in a single season, even if your home is hit by ten hurricanes.
No deductibles on liability claims
Let’s say your girlfriend stays over for the weekend and she gets hurt while on the property. She decides it was caused by your negligence and sues you. Luckily the personal liability section of your home insurance should take care of this. And even luckier for you, when it comes to personal liability claims, there is no deductible.
In states that are regularly hit by hurricanes such as right here on Long Island, NY, the insurance company might apply special deductibles on home insurance claims when the cause of the damage is determined to be a hurricane. Whether or not it will apply such a hurricane deductible depends on the particular ‘trigger point’ chosen by the insurance firm.
These trigger points vary by insurer and by state, but they usually apply when the NWS (National Weather Service) officially declares a hurricane warning or watch, or defines how intense the hurricane is in terms of wind speeds.
Insurance companies also sometimes apply “named storm” deductibles to a tropical storm, typhoon, cyclone, or hurricane declared by the NWS or the U.S. National Hurricane Center when a name or number has been assigned to that hurricane, for example Hurricane Andrew.
Hurricane deductibles are typically relatively high compared to other homeowners policy deductibles. They are calculated as a percentage of the policy limits instead of a fixed dollar amount. In certain New York, many companies allow policyholders to pay a higher premium if they prefer a deductible with a fixed dollar amount. However, many of the big name insurance companies such as Allstate and State Farm, require a minimum 5% of the dwelling amount as a hurricane deductible for all homeowners on Long Island. In coastal regions where the risk is particularly high, however, the insurance firm might have a mandatory percentage deductible.
Wind and hail deductibles
These work in the same way as hurricane deductibles but are triggered by ANY wind claim. The amount you have to pay is also calculated as a percentage (mostly between 1 percent and 5 percent) of the claim instead as the normal fixed dollar amount.