Home Insurance: 500 or 1000 Deductible

In addition to comparison-shopping, one of the ways of saving money on your home insurance premium can be by opting for a larger deductible.

Deductibles are the amount you agree to accept responsibility for paying when a property loss occurs under your home insurance policy. The claims department of the insurance company subtracts the amount of the deductible from the final payment for losses.

Recommended deductibles for home insurance are the $500 deductible and the $1,000 deductible.

Deductibles, however, can be as high as $2,500 or $5,000, depending upon how much credit the insurance company will offer, and the amount of insurance coverage you are willing to accept as your responsibility.

Insurance is regulated by states, so deductibles and requirements can vary from state to state.

Insurance deductible requirements are also on the increase in many states.

For example, in some states the minimum deductible may be $1,000, in others – such as Texas – deductibles are required to be a percentage of the coverage purchased on home insurance policies.

The two best ways to discover the requirements for home insurance deductibles in your state is to access the website for the Insurance Department in your state by going to the state government website and searching for insurance.

A wealth of information usually exists on this site, including insurance company and agent licensing as well as consumer information.

Another viable way of finding out this information is to contact your insurance agency or company.

Be sure to compare quotes using the FREE tool above!

Considering Deductibles

Before choosing a deductible, think carefully about the claims you might submit under the property coverage on your dwelling.

For example, if a claim under your home insurance policy will cost less than $500, for example – to repair the dry-wall of a child’s bedroom where the baseball bat resulted in a hole- would you just write a check for the materials to repair the hole, have it done, and not mention it to the insurance company?

Perhaps the barbecue flared up, melted the vinyl siding, and repairs to the siding cost $700. Would you submit that claim? Be practical about insurance as with anything else. Suggestions for coping with an increased deductible may be:

• Establish a fund to defray costs of routine home repairs
• Get a home inspection from a reputable company to determine what systems, such as heating, air-conditioning, plumbing, and alarms are in the process of deteriorating – and plan to budget these repairs before they become severe.
• Obtain quotations from several insurance companies to help determine just how much money in premiums a higher deductible can save

Obtaining Quotations That Reflect Different Deductibles

Briefly, the process for obtaining quotes is as follows, but in this case, you will be requesting quotations with premiums for both the $500 deductible and the $1,000 deductible. The aim is to keep other variables the same to compare adequately.

Determine the Amounts of Coverage for the Dwelling and Contents

Replacement cost coverage is recommended for the dwelling and contents to help avoid under-insuring for catastrophic losses.

Building construction and codes change considerably over the years and you will want to have your property replaced by up-to-code materials without assessing additional costs. To estimate replacement cost coverage on your property, do the following:

• Consult with your agent about their estimate or go to a free online calculator such as building-cost.net to figure the replacement cost of the dwelling for yourself.
• Do a home inventory to determine contents coverage needed. A home inventory form is available from your agency. Be sure to protect it in a safe-deposit box for future reference.
• Carefully ascertain the values of jewelry, guns, and fine arts because limitations are set in the home insurance policy. Purchasing a rider can provide more complete coverage for these items.

Choose the Perils for Which You Want to Be Covered

Perils are the causes of loss for which you expect the insurance company to cover.

Usually people choose the Special Coverage form, which covers the usual perils of fire, lightning, windstorm, hail, explosion, vehicles, theft, vandalism, and other perils.

However, that flood and earthquake coverage are not provided by a home insurance policy.

Consult with your agent about this coverage if needed.

Ask For Separate Quotations for Stated Deductibles

Request that the insurance companies you choose present you with separate quotations for premiums for a $500 deductible and a $1,000 deductible to allow you to compare costs.

The quotations need to be separate because the deductible credit, if any, is applied to the premium for each type of coverage.

Set Reasonable Limits for Personal Liability and Medical Payments

As liability coverage, this type of insurance is not subject to deductibles, but it is important to set your limits high enough to protect you and your family’s assets in the event of a loss and lawsuit.

Usually the limits are set at $100,000, but as our society becomes more litigious, it might be a good idea to increase the limits to $300,000 to avoid having to pay additional costs for courts, attorney fees, and rewards given.

Examine the Insurance Companies From Which You Obtain Quotes

Be careful to make certain that not only are the insurance companies from which you acquire quotes licensed in your state, but also that they are financially able to meet their obligations. Ways to check this can be accessed through:

• National Association of Insurance Commissioners (NAIC)
• A.M. Best Company
• Standard and Poor’s

This may seem as though it is an additional hoop to jump through in the process of obtaining a quotation, but it is not. Suddenly, when you have a loss, finding that your insurance company is reaching insolvency is terrifying.

Look at the company’s complaint ratio also, because a symptom of financial stress in an insurance company can be a rise in complaints about the way they handle claims.

Evaluating Quotes That Reflect Different Deductibles

Look carefully at the quotes. It may help you to either do an Excel spreadsheet or make notes to ensure that the amounts of coverage and perils offered are the same throughout the quotations.

Separate the premiums for property coverage because they should reflect the difference in premium from a $500 deductible to a $1,000 deductible.

It is not guaranteed, but sometime you may save as much as 25% on your premiums if you increase your deductibles.

At the risk of seeming redundant – be sure to read your quotations, ask questions, and clarify anything you do not understand.

When you receive the final policy, again read the policy to see if it matches the quotes in areas other than premiums.

Most insurance policies now are printed and issued by computers, but we are all aware of the fact that computers are operated by fallible people.

Check your policy.

Be sure to always compare quotes using our FREE search tool at the bottom of this page.