How Home Insurance Deductibles Work

For many, using home insurance is an infrequent task. You may not file a claim for years. When you do, you may have some concern about what a deductible is and how it applies to your situation. The good news is the process is often very simple and straightforward. For most property owners, the deductible is the amount you pay before your insurance covers the rest. Here is how it may work.

You Need to File a Claim

A small fire occurs in the home. Or, you suffer loss as a result of a thunderstorm. You need to use your home insurance to cover the losses. What can you expect to happen?

Your agent will assess what happened. Then, the agent verifies you have coverage for the type of loss you have. It is common to have coverage when the incident is something you could not avoid or prevent. Fires or theft are perfect examples. Accidental risks have coverage in most cases.

Let’s say the insurance company approves your claim. The next step is generally to get an appraisal for the work that is necessary.

If a fire occurred, you may need to have the area professionally cleaned and cleared. Then, there is the need to rebuild the overall structure. You may also have some losses associated with belongings destroyed. No matter what the work is, the insurance company needs to know how much it costs to get it back to the condition it was.

Once the estimate is in from a professional, the insurance agent likely goes to work for you. He or she files the claim. Once approved, the insurance company writes a check for their portion. Remember, this is likely not the full amount for the damage

Let’s say the damage from the fire was worth $3,000. Your home insurance policy has a deductible of $1,000. In this case, the insurance company writes a check for you for $2,000. It is up to you to come up with the remaining $1,000 to cover the repairs. That is your financial responsibility.

Deductibles vary. However, you can adjust them when you buy your home insurance policy. Always choose an amount that fits your needs. Remember, these are funds you must pay out of your pocket before the insurer can cover the rest. This means you need to have this amount of money on hand to cover the losses. Your agent can help you choose the proper amount.