How to Get Cheap Home Insurance with Deductibles

Homeowners can save money on building and contents insurance premiums by increasing deductibles. But they should compare online quotes first.

How to find and buy the cheapest home insurance? One answer is to set a high deductible.
A deductible is the money a homeowner has to pay on a claim before the insurance company starts to pay the loss. It is the homeowner’s responsibility to pay the deductible for the claim. For example, if the homeowner’s deductible is $500, and he or she makes a claim that the insurance company accepts for $10,000, the insurer will pay $9,500 and the insured will pay $500.

Higher Policy Deductibles Mean Lower Policy Premiums

A deductible exempts the insurer from paying an initial amount in the event that the homeowner sustains a loss. As a result, higher policy deductibles mean lower premium rates.

Usually a deductible is a flat amount of money, such as $250, $500 and $1000. Most insurers recommend an average insurance deductible of $500. If the insured can afford to raise his or her deductible to $1,000, he or she may save as much as 25% off of policy premiums. If the homeowner raises the deductible to $2,500, he or she could save as much as 30% off of insurance premiums. The higher the deductibles, the lower the premiums.
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A deductible can also be a percentage of a home’s insured value. For example, there are catastrophe deductibles in Florida, which are indicated as a percentage instead of a dollar amount. A percentage deductible makes a homeowner liable for 1 to 5% of the insured value before the insurer starts to pay any loss. For example, if a homeowner has a 3% deductible and his or her home’s insured value is $100,000, he or she will have to pay the first $3,000 in any loss or any damage. In this circumstance, a higher deductible percentage means a lower policy premium too.

High Deductibles Keep Low Cost Home Insurance

Having a higher deductible is also a good way to submit fewer claims. When a homeowner makes a claim, it affects his or her risk profile and the premium will rise. If the dollar amount of losses or damages are lower than the deductible, the policyholder needn’t ask the insurance company to pay the small claim, which can help he or she maintain a no-claim or low-claim record and keep his or her home insurance rates low as well.

Risks of House and Contents Insurance Deductible Solutions

But having a higher deductible also means taking a higher risk. The insured must be able to pay the higher deductible once he or she makes a claim. If the deductible is too high, the insurance cannot safeguard the insured from the events that may damage his or her dwelling and contents.
Having a higher deductible also means that the insured may never get paid on any “small claim.” The insured should set a reasonable deductible before buying the best building and contents insurance policy.