When you purchase a home insurance policy, you have the option to choose your deductible. A home insurance deductible is how much you will pay out of pocket after a home insurance claim before you receive compensation. If you file a claim, for example, you must pay the amount of your deductible toward repairs before receiving compensation for the remaining damages. 

There are different limits of home insurance deductibles available depending on your insurer and your needs, however.  

The two most common limits are $500 and $1,000, although $1,000 is usually recommended. 

Is a Cheaper Deductible Better? 
A smaller deductible means that you have to pay less out of pocket after a claim, but this isn’t always the best choice when it comes to your home insurance policy. Firstly, a lower deductible can often mean higher monthly premiums. More importantly, however, a low deductible makes you run the risk of a claim not being completely covered under your home insurance rates. 

For example, say your home insurance covers $10,000 in personal belongings coverage and your deductible is $500. A storm does $12,000 in damage to your personal items. Even after reaching your deductible of $500, there is still a remaining $11,500 in damages, $1,500 of which is not covered by your home insurance policy. 

If your deductible was $1,000, you would save on the extra $500 even after the damages go over the limit of your coverage. 

On the other hand, a lower deductible is easier to reach. Home insurance benefits will not pay out if you don’t reach your deductible. If damages are caused to your home costing $900, your deductible of $1,000 will not be reached meaning you will have to pay for the damages out of pocket. If you have a lower deductible of $500, you can easily reach this deductible and receive compensation for the remaining costs (in this case, $400). 

Of course, you should speak with your financial advisor and insurance agent to discuss your options when it comes to home insurance and your deductible. You may want to save money on monthly premiums and assure that you will be covered in case of a claim. Or you may want to have a low out of pocket cost when it comes to your deductible and receive compensation where possible. Connect with an insurance agent today to talk about how you can adjust your home insurance deductible.