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4 Things to Know About Home Insurance Deductibles

Hey everybody! My name is Butch Swank. We’re going to discuss deductibles. 

Almost everybody knows how a deductible works for car insurance. For instance, you’ve got a $500, $100, or a $1,000 deductible. If you back into a fence and wreck your bumper you’re going to be responsible for that portion to get your car fixed. So, for a house it’s different. Normally, you don’t just have one deductible. You’ve got one that is called AOP (All Other Perils) and then in Florida, you have a hurricane or wind deductible. So, All Other Peril (AOP) is going to be precisely that. It’s going to be coverage for the house burning down, it’s going to be for theft, vandalism, etc. You’re going to be responsible for your portion of the deductible and typically those are $1,000 or $2,500.

You have options there, talk to your agent about them and how different deductibles effect your price (in the insurance world we call it premium instead of price). The next component to a deductible is hurricane or wind. The reason we have that is Florida is, of course, prone to hurricanes so they had to break it out into two different types of insurance deductible. The point of that is to give you some flexibility in terms of what your insurance costs are.

You can have a higher deductible which means your premium(price) is going to be lower. So, the higher your deductible the lower your premium is. However, and I lived through this after Hurricane Irma. Let’s just do some simple math. Let’s say you have a 5% hurricane deductible and let’s put your house at a replacement cost of $300,000. That means you’re going to have to pony up $15,000. (5% of $300,000 = $15,000) So, if a new roof costs $20,0000, you’re going to get a check from the insurance company for $5,000 so be mindful of what you’re balancing. A 2% deductible would have been only $6,000 so suddenly I’m getting a $14,000 check instead of a $5,000 check. So, you know, run the numbers, talk to your insurance agent, and say “Hey, let’s look at this! You know, let’s look at the frequency of hurricanes. Let’s try to gauge where I am, which part of Florida my house is.” It does seem like there are not too many places that are exactly safe from hurricanes, but the closer you are to the coast, the higher the probability of damage. The further inland you are it’s probably less. So, these are things for you to consider.

It’s also important to remember these are things to do when you are getting a policy or before the renewal of a policy. You cannot change these hurricane coverages in the middle of the policy term. It’s important to know that because you can’t call up on June 1st and say “Hey, you know I want to lower my hurricane deductible for a few months and then make it go right back up as soon as hurricane season is over.” The insurance carriers are very firm on this. So, be mindful of the fact you’re going to be stuck with that deductible choice for a year, so make a thoughtful decision.

Any questions? I say, give us a call. We are always happy to explain things to help you have a better understanding of how your insurance works.

Goodlad & Swank