If you own a home you “should” have a homeowners policy! If you do, and your payment is routed through an escrow account, you may not realize how much it impacts your mortgage payment. So, how do you lower your homeowners insurance premium? One quick easy way is to increase your deductible! Read below to learn how a deductible impacts your homeowners insurance policy, and thus, your mortgage payment.
A deductible is the amount that you, as the policyholder, are responsible for paying out of pocket before your insurance coverage pays on a covered claim. For example, if you have a $1,000 deductible and suffer $5,000 in damages as the result of a covered event, you would pay the first $1,000 of the damages and your insurance provider would cover the remaining $4,000 balance.
In North Carolina, like most states, the amount of your deductible will typically be chosen by you when you purchase your insurance policy, and it can have a significant impact on your premium, which should be explained by your agent. The higher your deductible, the lower your premium will be, because you are taking on more of the risk of a covered loss. This means you can save money on your insurance premium by choosing a higher deductible, but keep in mind you’ll also have to pay more out of pocket if/when you need to file a claim.
It’s important to keep in mind that you should choose a deductible that you can afford to pay in case of an accident or loss. Most people establish an emergency fund and maintain enough money to cover emergency expenses such as deductible amounts for this reason.
Your agent should also be reviewing your policy with you at least annually to make sure you still have adequate coverage based on current materials costs and inflation rates. This is a good time to review your deductibles and explore possible savings on premium by adjusting your deductibles.
Also note that there might be separate deductibles for different types of coverage that you might have in your policy, such as wind and hail coverage, flood coverage, etc. it is important that your agent review these things with you at the time of application. In most instances your wind and hail coverage deductible will be either a percentage of the welling amount, or a set dollar figure which can be higher or lower than your homes deductible.
To summarize this, work with your agent (if you don’t have an agent, it’s never a bad idea to speak with one! if possible) to explore what savings are available if you were to increase your deductible, or how much your premium would increase if it were lowered. Ask about wind and hail deductibles and adjust them as well to see what savings could be unlocked! Create an emergency fund and make it your goal to maintain at least what your policy deducible is in the account so that if/when you have to file a claim, you’ll be able to avoid delays in repairs.