How Do Insurance Deductibles Work?

Insurance deductibles are something our agents mention quite often. You most likely have heard of this term, know what it means, but are confused about how the amount of your deductible impacts your insurance.

Understanding the role your deductibles play when insuring your car or home is vital so you don’t encounter any unexpected surprises down the road.

What is an insurance deductible?

The insurance deductible represents the amount of money you’re obligated to pay before the insurance coverage kicks in. Deductibles can either be dollar-amount or percentage-based. The dollar-amount typically ranges between $500 and $1000 per covered loss. Homeowners insurance policies also offer percentage-based deductibles. This means if your home is worth $250,000 and you have a 1% deductible with the policy, you will pay $2,500 upfront for any covered loss.

In short, the deductible represents what you pay in the short-term should a claim be filed, while the premium you pay for a policy is the long-term investment. Higher deductibles decrease what you pay for a premium. Lower deductibles increase what you pay for a premium. The deductible for your auto or home policy can be found on the declarations page at the front of the policy.

Deciding the Right Insurance Deductible

The “right” deductible depends on your financial situation and claim circumstances. You could have a $500 deductible and it would make sense for one claim but not for the next.

Picking a deductible amount is a personal decision, we can suggest one and tell you the pros and cons, but ultimately you need to make the choice based on your needs.

Deductibles for Floaters and Endorsements

Sometimes the limits for standard homeowner’s policies are not enough to cover expensive items with high values. To extend coverage, clients will purchase an endorsement or floater policy to extend coverage, which will increase your deductible.

Hurricane and Windstorm Deductibles

Most states treat hurricanes and windstorms the same as any other covered peril, but Massachusetts is one state that requires a separate deductible for hurricanes and windstorms because the region is at a higher risk. These deductibles are usually a percentage.

Call H&K Insurance at 617-612-6500 to discuss your options today!