Home Insurance Florida| I sat down with Danielle Healis, General Manager at Killingsworth Insurance, to talk about deductibles. Your deductible is the amount “deducted” from the money you receive from your insurance company if you have a covered loss (claim). Generally speaking, the larger your deductible is, the lower your premium, the amount you pay for your insurance policy, will be. Danielle has been helping homeowners pick a deductible for over 25 years at Killingworth, a family owned and operated agency that’s been in business for over 40 years! She shared with us five questions she has her customers consider before choosing a deductible:
1. HOW MUCH CAN YOU AFFORD?
How much you can afford to spend on your insurance premium is likely the first decision you will have to make. You pay your premium no matter what, while your deductible is something you only need to pay in the event of a covered claim. Since the deductible you choose will either lower or raise your premium – it’s important.
You may find that you can only afford your premium with a high deductible, in which case your options are limited. If you’re not as price sensitive then you have the luxury of taking the next step of deciding whether or not a small or large deductible makes sense for you.
2. ARE YOU PREPARED TO COVER YOUR DEDUCTIBLE?
This is a central question to your deductible decision. It's tempting to go with a high deductible to lower your premium cost. But if your home sustains $3,000 in damage, and you have a $2,000 deductible, can you afford to repair the damage? With a $1,000 deductible, you could repair it more easily.
But you need to weigh possibilities like that against the higher overall costs you will pay for the insurance. The fact is, most homeowners only file an insurance claim once every nine years or so. But you will pay sometimes as much as 20 percent more each year to have that lower deductible.
3. WILL A LOW DEDUCTIBLE BE TEMPTING?
Industry research shows that low deductibles actually tempt some homeowners into filing smaller, more frequent claims. But that strategy will create more problems in the long run. Many insurance companies will increase your premium if they see a pattern of claims or they may not even offer you coverage.
So claiming that stolen bicycle, repairs to the garage door you backed into and the window the kids broke playing ball can actually end up costing you much more over time in increased insurance costs than if you had just paid those smaller expenses out of pocket.
4. ARE YOU DISCIPLINED TO SELF-INSURE FOR SMALL DISASTERS?
You might be better off choosing a higher deductible, building your own emergency fund and using your homeowners insurance as only for major disasters. The key here is “building your own emergency fund” Do you have the discipline to do it?
Some people have chosen that route. There's a growing trend toward so-called "self-insurance," that is, covering small damages and losses with your own funds. This is especially true when it comes to pricier homes. In Malibu, Calif., for example, it's not unusual for $10 million homes to have a deductible of $10,000, $25,000 or even $100,000!
5. DO YOU UNDERSTAND WHICH DEDUCTIBLES ARE A PERCENTAGE AND NOT A FIXED AMOUNT?
Make sure you understand if your policy has any deductibles that are a percentage of the total loss and NOT a fixed amount. This can vary depending on your policy type and carrier. In Florida your Hurricane Deductible is a percentage of your total loss. It’s important to understand this ahead of time so you aren’t taken by surprise. Obviously, your deductible could be quite large in some circumstances.
Selecting a deductible that works for your family’s risk management strategy and budget is important. If you take the time to ask yourself these five questions you will likely arrive at a decision you can feel confident in. And, if you still need help there are agents out there, like Danielle, who are there for you! If you don’t have an insurance agent you can locate one in your neighborhood here:
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