High Deductible Home Insurance
Home insurance protects you against unexpected loss and can be purchased with various coverage options. One key decision you'll make when purchasing a home insurance policy is the amount of the deductible. High deductible home insurance has advantages and disadvantages depending on how much you want to pay for coverage and how much you're willing to pay out of pocket if you make a claim.
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Costs
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Your cost for a home insurance policy is cheaper when a higher deductible is selected. The average deductible for a homeowners insurance policy is $500 (as of 2009). Higher deductibles range from $1,000 up to $5,000. The higher the deductible the more you'll save in the cost of premiums.
Benefits
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Since your cost for premiums will be less when you choose a high deductible home insurance policy, you can use the savings to pay the cost of the higher deductible when you do need to file a claim. If you don't file claims very often you can enjoy major savings on premium payments.
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Considerations
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When you have a high deductible, you need to pay that amount in the event of a claim before insurance will cover any costs. If you can afford to pay $1,000 or $1,500 out of pocket, choose a higher deductible to lower the total cost of the insurance policy. You choose the deductible amount within a minimum and maximum range set by the insurer. You can change your deductible at any time by contacting your insurance company or agent.
Risks
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A high deductible home insurance policy has risks if your home is in an area prone to storm damage. If you need to file frequent claims, the deductible for the policy could be more than any savings experienced from the lower cost of the premium. This can happen when multiple claims are made within a short period such as three years or less.
High Risk
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When you make multiple claims on your policy an insurer can raise your premium rates. Insurers also can apply an increased rate based on factors such as credit score and their claims experience for similar customers. When you're faced with increased premiums a high deductible can be used to decrease the cost of the policy.
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