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How does my home insurance deductible affect my premium?

Home insurance premiums can be affected greatly by the deductible that you select. Higher deductibles typically mean lower premiums, while lower deductibles usually mean higher premiums. However before changing your deductible, make sure you understand the affect this has on your homeowners policy and personal financial situation.

How it Works

Your home insurance deductible is the amount of money you will pay out of your pocket before your insurance company will start paying towards damages or losses in the event of a claim. For example, if you had a $1,000 deductible and your home was damaged due to a fire, you would be responsible for the first $1,000 worth of damage. Your home insurance company would begin paying for damages after the $1,000 deductible was paid. Your deductible greatly affects the amount of your premium. If your deductible is very low, you will pay more for your home insurance. However, in the event of a loss you will not have to pay as much money out of your pocket. If your deductible is very high, your premium will be lower but you will pay more in the event of a loss. The safest route to take when determining your deductible is to determine the most amount of money you would feel comfortable paying in the event of a loss. If you make your deductible higher than that, you might be setting yourself up for a financial burden in the event of a claim. If you make it much lower, you might be paying much more for home insurance each month than you need to.

Last Updated: July 15, 2009

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