Was I right to choose such a low deductible?
Was I right to choose such a low deductible? A friend recently approached me and asked why he paid so much for his home insurance. When we were looking at his contract, we found that he had a deductible of $ 400. My advice was: “go and negotiate the deductible.”
It turns out that in a home insurance contract, the deductible is a fundamental piece. Depending on its amount, so will the price of the insurance premium. The formula is simple, the higher the deductible, the lower the premium, and vice versa.
When you sign a contract with such a low deductible, you are telling the insurance company: please take all the risk possible. If a fire in the insured property causes damage equal to $ 15,000, upon a claim, an owner like my friend will pay the first $ 400, while the insurer will assume the remaining $ 14,600. Since insurance is taking on so much risk, one way to mitigate it is to increase the cost of the annual premium. In the particular case of my friend, he pays $ 4,000.
Generally, there are two types of deductibles, a standard one and a percentage one. The first is a fixed amount, like the aforementioned case, that you must pay $ 400 each time he makes a claim for damage to his property.
For its part, the percentage deductible is specific for claims for damage caused by hurricanes, named storms, or storms.
If a $ 300,000 house is insured for the 1% deductible. If the property damage after a hurricane was $ 20,000, the owner would have to pay the first $ 3,000, which is 1% of the covered amount, and the insurance company would assume the rest, $ 17,000.
Another aspect to take into account about the deductible is that each claim entails the payment of the deductible. It does not matter if the property is damaged two or three times during a year. Unless you live in Florida and your home is damaged two or more times by different hurricanes during the same season. Then, the second and third claim for damages must be fully assumed by the insurer. Was I right to choose such a low deductible?
In short, if you are not clear about the protection that your home insurance provides, call Univista Insurance.