Understanding Deductibles in Your Home Insurance Policy

May 15, 2024

A deductible is an essential component of your homeowners insurance policy, but it can often be a source of confusion. At Schwartz Insurance Group, we believe in empowering our clients with knowledge to make informed decisions about their coverage. In this blog, we'll help you understand what a deductible is, how it works, and how to choose the right one for you.

What is a Deductible?

In simple terms, a deductible is the amount you agree to pay out of pocket before your insurance coverage begins to pay on a claim. For example, if you have a $1,000 deductible and you file a claim for $5,000 in damages, you will pay the first $1,000 and your insurance will cover the remaining $4,000.

How Does a Deductible Affect Your Premium?

There's a direct relationship between your deductible and your premium—the higher your deductible, the lower your premium, and vice versa. If you choose a high deductible, you're taking on more financial risk in the event of a claim, so your insurance company will typically charge you a lower premium.

Choosing the Right Deductible

The right deductible for you depends on your financial situation and risk tolerance. If you have enough savings to cover a higher deductible and are comfortable with the risk, you might opt for a higher deductible to lower your premium. However, if a high out-of-pocket cost would be a financial strain, you might choose a lower deductible and a higher premium.

Deductible Types

There are generally two types of deductibles in a homeowners insurance policy: a flat dollar amount (like $500 or $1,000) or a percentage of your home's insured value. Make sure you understand which type you have and how it works.

Understanding your deductible is key to understanding your homeowners insurance policy and how much you could end up paying in the event of a claim. At Schwartz Insurance Group, we're here to help you navigate these decisions. For more information or to get a personalized quote, please call us at (502) 451-1111 or visit our website at https://www.schwartzinsgrp.com/get-a-quote.