Understanding Your Homeowners Policy

The home insurance market has hardened over the last 12 months. So….what does that mean? We now have less carriers to choose from and the underwriting guidelines for each carrier have gotten tighter. We’ve seen many of our carriers do everything they can to mitigate their coastal exposure by limiting roof year eligibility, changing percentage-based deductibles, and charging more for older homes with little to no updating.

The most important thing you can do is familiarize yourself with the different deductible options you have that may or may not have changed on your renewal. Reach out to your agent or account manager if you have any questions around your coverages, the limits of your coverages, or to just explain the difference in your deductibles. Many homeowners are seeing their dwelling coverages rise without asking for the increase. Most carriers have what is called inflation guard built into their rating systems. This means that while your gas, food, and rent are increasing, so are the costs to rebuild your home. Carriers will usually account for this with a 5-15% increase in your dwelling coverage to make sure your home can be replaced with today’s current building costs.

Understanding the Difference in Home Insurance Deductibles

Home insurance is an essential safeguard that protects your property from unexpected events, such as fires, storms, theft, and more. When you purchase a home insurance policy, one crucial aspect you’ll encounter is the deductible. The deductible plays a significant role in determining how much you pay out of pocket before your insurance coverage kicks in. In this blog, we’ll delve into the differences in home insurance deductibles and help you make informed decisions about selecting the right deductible for your needs.

What is a Home Insurance Deductible?

A home insurance deductible is the amount of money you agree to pay towards a covered claim before your insurance company starts covering the costs. Think of it as your financial contribution towards repairing damages or replacing stolen items. Deductibles are designed to share the risk between you and your insurance provider.

Types of Home Insurance Deductibles:

1. Flat Dollar Amount Deductible: This is a straightforward type of deductible where you choose a specific dollar amount to be your deductible. For example, if you have a $1,000 deductible and file a claim for $5,000 in damages, you would pay $1,000 out of pocket, and your insurance would cover the remaining $4,000.

2. Percentage-Based Deductible: This type of deductible is calculated as a percentage of your home’s insured value. If your home is insured for $300,000 and you have a 2% deductible, your deductible would be $6,000. If you have a claim for $10,000 in damages, you would pay the $6,000 deductible, and your insurance would cover the remaining $4,000.

Types of Percentage-Based Deductibles: There are a couple of types of percentage-based deductibles in coastal areas.

1. Wind/Hail: This type of deductible means you will be responsible for basically any damage that occurs to your home related to weather. Storm, wind, hail, named storm, tornado, tropical storm, and hurricane are some of the weather-related perils that will result in the percentage deductible you may have. While this is the broadest of percentage-based deductibles a wind/hail deductible can save you on your insurance premium.
2. Named Storm: This is considered a step up from the wind/hail deductible. Named Storm means you will be responsible for any damage that occurs to your home that is caused by a named storm specifically. 
3. Hurricane: This is the best percentage-based deductible that you can get in a coastal area. However, these are getting far less common, especially in a hard market. A Hurricane deductible means you only pay your percentage deductible if a category 1 or higher named Hurricane causes damage to your home. Any other weather-related peril would be covered with your AOP (all other perils) deductible.