Have you ever looked at your home or renters insurance and wondered what it meant when the deductible said 1%? Well we’re here to tell you!
While your auto insurance might list a deductible of $500 or $1000, your home insurance typically shows a percentage based deductible. The percentage is based on the total amount of coverage on your home.
So if your home is insured for $200,000, then you would have a $2000 deductible in the event of a claim. (This is the amount you would be responsible for paying before the insurance kicks in.)
If your home is insured for $500,000, then you would have a $5000 deductible. Big difference! But they both would be listed as 1%.
Often there are many different deducible options available, but many mortgage lenders will require that you choose a 1% or lower in order to keep the repair cost manageable.
If you choose a much lower deductible like $1000 (if it’s available, not all policies offer these), you would pay a much higher annual premium for the coverage because you’d have less out of pocket after a loss.
Deductibles can be complicated! But it’s important to know what you have and have that amount available in your emergency savings in case of a major claim. If you’re unsure how to read your policy or want to know other deductible options, give us a call today and we’ll be happy to help!