The best advice we give our customers about home insurance is to avoid filing small claims. Insurance company underwriters get nervous about claim frequency – meaning policies with multiple claims, especially if they filed in a short period of time. Multiple claims, even with a small payout, will adversely affect home insurance rates and may even result in a non-renewal of coverage. To remove the temptation to file a small claim, consider raising your home insurance deductible. But, what amount is the right home insurance deductible for you?
Average Homeowners Insurance Deductible Explained
Think of your deductible as a bit of self-insurance. By selecting a particular deductible, you agree to pay for all claims less than that amount. If the amount of the claim exceeds the deductible, then the insurance company owes you the difference. Deductibles are a common element of most insurance policies including auto, home, health, commercial property, and some general liability policies. Typically, a higher deductible will result in a lower policy premium but, of course, additional out-of-pocket expenses for you in the event of a claim. The trick is to find the right balance between premium savings and an affordable self-insurance amount, should a claim occur.
Higher than the Standard Deductible Home Insurance Saves Money
Home insurance claims tend to be larger than losses covered by other policies, with an average payment of around $12,000. However, the frequency of claims for home policies is relatively low, with around 5% of all policyholders filing a claim during the year. In simple terms, you probably will not need to file a claim for home insurance very often, but the amount paid for the claim will likely be large.
Because of this, we recommend you consider a home insurance deductible that is on the higher side. A $1,000 deductible is commonly used, but consider $2,500 or even $5,000. Does that amount seem too high? The premium savings may work in your favor. For example, the savings between a $1,000 deductible and a $2,500 deductible can be up to 30% of your total premium. On a $1,000 premium home policy, that could add up to over $3,000 in savings over a 10 year period.
The Right Homeowners Insurance Deductible for You
So, what is the right home insurance deductible for you? You should consider how much “self-insurance” you can afford if a claim occurs. If $2,500 would be a financial burden, then you should choose a lower amount. But, if you see the value in saving premium over the long-run in exchange for higher out-of-pocket costs if you have a claim, then a higher deductible probably makes sense for you.
Contact the professional agents at Safeguard Insurance to see just how much you can save by increasing your home insurance deductible. We can provide you quotes with multiple A-rated homeowners insurance providers such as Acuity, Badger Mutual, Travelers, Safeco, Nationwide, Progressive, and Mercury. Better yet, we can provide additional savings by packaging your auto and home insurance together.