If you’re looking at homeowner insurance policies, you’ve surely come across the word “deductible.” Let’s take a look at what a deductible is and how it affects your choice of insurance policy. 

What Is a Deductible?

A deductible is an amount you must pay out of pocket (from your own funds) before an insurance policy kicks in to cover losses, like vandalism, theft, or damage from fire. Usually the deductible is simply subtracted from the amount paid out when an insurance claim is filed. 

For example, if your deductible is $500, and the amount claimed is $4,500, you would actually get $4,000 from your insurance company. 

Sometimes a deductible is calculated as a percentage, rather than a flat amount. However, a dollar-amount deductible is much more common and more likely what you’ll encounter in your search for homeowner insurance. 

How Do Deductibles Affect Insurance Premiums?

You might think, “Well, I want to choose the lowest deductible then because it will cost me less.” Not so fast. 

The higher your deductible, the lower your insurance premium usually is. By being willing to take a chance that you’ll have to pay more in the event of a claim, you can take advantage of lower premium costs. Your premium is the amount you pay for homeowner insurance over a certain period of time, whether you pay every month, every six months, or every year. 

Which Deductible Is Right for You? 

So, how do you decide which deductible is best for you? Should you take a lower deductible and higher premium, or is a higher deductible with a lower premium preferable? 

The answer lies in two places: your personal finances and your estimation of risk. If you have to file a claim, could you afford a large payment that comes with a large deductible in return for a low premium? How much can you afford to pay for your premium? Even if you want a low deductible, if the premium cost is out of your budget range, you may have to settle for something in between. 

In terms of risk, think about the state of your home, your location, and your past history with insurance. Have you filed a lot of homeowner or renters claims before? Do you live in an older home or one that perhaps needs a new roof? Think about what would happen if a large storm hit your town. 

If this all sounds confusing or overwhelming, you’re not alone. Many people struggle with the deductible issue. That’s why we at J. K. Meadors & Co are here to answer your questions about deductibles and help you select the best one for your lifestyle and budget. We don’t want your insurance premiums to be a burden, nor do we want an emergency to empty your bank account with a high deductible. 

Give us a call at 405-377-0000 today, and we’ll be happy to talk more with you about it.  With the right balance between deductible and premiums, you can forget about your homeowner insurance until the event you need it and get back to enjoying life!