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Understanding your homeowners deductible

Posted by Scott Stueber, CPCU, CISR, AAI on Feb 28, 2023 9:00:00 AM

Understanding your homeowners deductiblesAre you confused by the term deductible? A deductible on a homeowners, condo, or renters policy is important as it helps policyholders cover losses affordably. Here’s how it works. 


How an insurance policy deductible works for you


The deductible on an insurance policy is the sum of money a policyholder must pay before your insurance company covers a loss from a claim. Whether you reside in a home or condo you own or a rental property, your insurance policy has a deductible. 


A policy's deductible amount is based on protections set by the insurance carrier and may be as low as $250 or as high as $10,000. The higher the deductible, the lower the insurance premium rate. The policyholder agrees to be responsible for a larger portion of a covered loss. 


Insurance carriers typically charge deductibles as either a flat or fixed amount. They may also charge by a percentage of the home's replacement value under the Coverage A limit listed on a policy's declaration page.


West Bend's homeowners insurance coverage typically charges $1,000 as a policy deductible. Any deductible amount lower than $1,000 translates into a higher premium rate on a policy.


How an insurance policy deductible is paid


The deductible listed in a homeowners, condo, or renters insurance policy is the policyholder's responsibility when there’s a covered loss. The deductible appears as a deduction subtracted from the total amount the insurance company agreed to pay to cover the loss.


For example, you may submit a claim for hail damage to your roof, and the covered loss on that claim totals $8,000. If your policy lists a $1,000 deductible, the insurance company pays out $7,000 while you must pay the $1,000 difference.


Covered repairs for roof                     = $8,000

Less deductible                                      = -$1,000

Total payout for repairs                    = $7,000

by the insurance company


Deductible payments are paid upfront before the insurance carrier pays the balance of the claim. If claim damages are less than the deductible, the insurance carrier isn't required to pay out for the loss – as the deductible amount covers the bill.


How separate deductibles for specific policy coverages work


Some insurance policies offer an optional wind/hail deductible that applies only to wind/hail claims. The deductible amount is generally higher than the standard homeowners policy but provides some savings on premium rates. As mentioned, the higher deductible means the policyholder is responsible for a larger portion of the covered loss. 


An endorsement or rider, which is an amendment to an existing insurance contract, may be added to a policy as additional protection against specific kinds of losses. These may have separate deductible options equal to or higher than the listed deductible on the original policy. 


For example, suppose you have a finished basement and want protection against damage from sump pump failure or water backup loss. In that case, the policy may include a separate deductible for this specific coverage endorsement. It could be equal to or higher than the homeowner policy deductible. As mentioned before, the higher the deductible, the lower the insurance premium rate. The claim coverage paid by the insurance company includes the total for the loss, less the amount of the deductible paid by the policyholder. 


Your deductible options are listed on the policy declarations page and included in the insurance contract. A deductible is charged for every claim submitted. Should a policyholder file multiple claims during a policy term, they must pay the policy deductible amount owed for each separate claim.


If your home is insured with West Bend on a Home and Highway® policy, the policy may waive the home deductible for specific scenarios.


This article was written by Kim Bechler, senior personal lines underwriter. This article is intended for general educational and illustrative purposes only and should not be construed to communicate legal or professional advice.  Further, this article is not an offer to sell insurance. Please consult with your licensed insurance agent for specific coverage details and your insurance eligibility.  All policies are subject to the terms, conditions, limitations, definitions, and exclusions contained therein.



Topics: Home Insurance

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