Author Topic: How much is your deductible on your home insurance?  (Read 1749 times)

baloncesto

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How much is your deductible on your home insurance?
« on: December 04, 2018, 08:51:06 AM »
Alright ladies and gentlemen, how much is your deductible on your home insurance? How/why did you decide on that amount? We are recently new homeowners and I am second guessing whether or not my deductible is too high.

secondcor521

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Re: How much is your deductible on your home insurance?
« Reply #1 on: December 04, 2018, 09:49:50 AM »
$10,000.

Generally I choose to self insure as much as possible and lead a safe and boring life.  Since homeowner's insurance is mostly fire insurance, I try to avoid setting fire to my house or letting anyone in who might set fire to it.

I set the deductible to a level that I thought I could afford to come up with in the off chance a fire does happen.

Also, since my home is paid off I can under insure on the top end.  It is very rare for a house fire around here to result in total structure loss.  So I set my dwelling value coverage limit to 93% of the estimated rebuild cost.  While you have a mortage, you probably won't be allowed to do this.

Finally, make sure that you don't insure your land value.  If you have a $250K house on a $100K lot, have your home insurance set for $250K, not $350K.  Dirt doesn't burn.

Not on the subject of insurance, but also make sure that you file with your local taxing district for the homeowner's exemption if that is applicable (it usually is).  It will cut your property taxes in half, but you have to submit the paperwork.

Catbert

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Re: How much is your deductible on your home insurance?
« Reply #2 on: December 04, 2018, 11:05:11 AM »
5K on house.  That seemed to bring down the cost greatly from a 1K deductible.  After seeing secondcor521's answer maybe I should raise it.  In 40+ years I've only filed one claim (burglary in the 1980s).   

secondcor521

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Re: How much is your deductible on your home insurance?
« Reply #3 on: December 04, 2018, 11:36:15 AM »
There is usually a "bend point" that you can find by asking what the tradeoffs between deductibles and premiums.

At lower deductibles, you're trading off the small claims, which are relatively expensive to handle because the insurance company has to spend time and resources paying those small, relatively frequent claims.  The insurance company is willing to do that, but they'll charge you for the convenience to you and hassle to them.  Maybe they charge you 5 cents on the dollar for this part of your insurance.

At higher deductibles, you're really trading off how much of an infrequent large claim you'll cover vs. the insurance company.  This is the claim where your house actually does burn down.  It happens very rarely, and so maybe they charge you 1 cent on the dollar for this part of your insurance.

So you may find that the premium savings from going from $500 to $1000 deductible is equal to the premium savings between $10K and $20K deductible.  I chose the bend point (which in my case was the $10K) for this reason - it was the best tradeoff of premium savings versus dollar coverage for why I buy insurance.

Cassie

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Re: How much is your deductible on your home insurance?
« Reply #4 on: December 04, 2018, 01:05:29 PM »
1k.  Our insurance cost is reasonable so no need to go higher.

robartsd

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Re: How much is your deductible on your home insurance?
« Reply #5 on: December 04, 2018, 02:43:24 PM »
Not on the subject of insurance, but also make sure that you file with your local taxing district for the homeowner's exemption if that is applicable (it usually is).  It will cut your property taxes in half, but you have to submit the paperwork.
While I do think that most have a homeowner's exemption, it's not universally 1/2. California's exemption is much smaller than that.

patchyfacialhair

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Re: How much is your deductible on your home insurance?
« Reply #6 on: December 04, 2018, 03:03:40 PM »
$2500.

Saved a boatload on the premium compared to the $1k deductible, but not much more savings to go to $5k or $10k.

south of 61

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Re: How much is your deductible on your home insurance?
« Reply #7 on: December 04, 2018, 03:48:08 PM »
5k. The insurer automatically reduces that by $100 each year we renew the policy as a 'loyalty bonus' - so while the premium is calculated as though the deductible is 5k, it is actually down to 4.3k now.

We went with 5k as we were OK with having to contribute that much in the event that we ever had a claim (and because the 10k deductible was hardly any cheaper - compared to the hundreds you save by getting off the $500 or 1k deductible)
« Last Edit: December 04, 2018, 03:50:29 PM by south of 61 »

Brother Esau

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Re: How much is your deductible on your home insurance?
« Reply #8 on: December 04, 2018, 04:10:29 PM »
$10k. We would only file a claim for something well above that amount.

dhc

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Re: How much is your deductible on your home insurance?
« Reply #9 on: December 04, 2018, 04:48:40 PM »
$5000 for all of the reasons mentioned above. But you've reminded me that I should probably price out the options again just to make sure it still makes the most sense!

secondcor521

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Re: How much is your deductible on your home insurance?
« Reply #10 on: December 04, 2018, 08:15:45 PM »
Not on the subject of insurance, but also make sure that you file with your local taxing district for the homeowner's exemption if that is applicable (it usually is).  It will cut your property taxes in half, but you have to submit the paperwork.
While I do think that most have a homeowner's exemption, it's not universally 1/2. California's exemption is much smaller than that.

Good point.  I misspoke; Idaho's isn't even 1/2.  I forget the formula, but IIRC it's something like half of the property value up to some medium amount.

But overall, the point to the OP to file for the homeowner's exemption is still valid and worthwhile.

Rural

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Re: How much is your deductible on your home insurance?
« Reply #11 on: December 05, 2018, 05:06:54 AM »
$10k. Definitely wouldn't file for something less that that, really not for things much more. We need insurance for liability and for the unlikely but catastrophic, a total loss or similar. My husband built the place and would do the repairs for something as simple as trees through the roof, so supplies would be under even a $5k deductible. The walls are poured concrete and buried; even here in the old growth, we don't have any trees that could bring that down.

baloncesto

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Re: How much is your deductible on your home insurance?
« Reply #12 on: December 05, 2018, 03:17:42 PM »
Thank you all for the replies. We did file the homeowner's exemption and IIRC we saved about $100. Will filing a claim result in our insurance going up?

patchyfacialhair

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Re: How much is your deductible on your home insurance?
« Reply #13 on: December 05, 2018, 03:43:15 PM »
Thank you all for the replies. We did file the homeowner's exemption and IIRC we saved about $100. Will filing a claim result in our insurance going up?

Pretty much always yes. Sometimes during catastrophic events, a state's insurance commissioner will put a moratorium on rate increases due to claims, but that's never a guarantee. So just assume that a filed claim will increase rates.

DreamFIRE

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Re: How much is your deductible on your home insurance?
« Reply #14 on: December 05, 2018, 04:29:16 PM »
$1000 here.  It was $500, but I increased it several year ago due to the increasing rates.   It was $100 on my first home back over 25 years ago.

Since they keep increasing my coverage to about 50% above the market value of my home, plus another 25% rebuilding coverage on top of that, that's also increasing my rates.

Tempname23

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Re: How much is your deductible on your home insurance?
« Reply #15 on: December 05, 2018, 08:25:33 PM »
Mine is $4,048. I also have $4,048 out building coverage. (it is actually goes a little further than out buildings, fences, etc.)
 I got hit by Hurricane Micheal, I had closer to $19,000 in outbuilding damage. I'll be upping that amount. (if insurance is still available in Florida)
 Looks like the insurance paid enough to cover all my home damage, but it will be several more months
before we can get all the work done.
  Then I'll know for sure.

patchyfacialhair

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Re: How much is your deductible on your home insurance?
« Reply #16 on: December 06, 2018, 08:20:43 AM »
$1000 here.  It was $500, but I increased it several year ago due to the increasing rates.   It was $100 on my first home back over 25 years ago.

Since they keep increasing my coverage to about 50% above the market value of my home, plus another 25% rebuilding coverage on top of that, that's also increasing my rates.

Not that you asked for my opinion/thoughts, but keep in mind that insurance companies typically do not care about the market value of your home at all. Nor do they care about the taxable/assessed value. They only care about what it would cost to rebuild. It's why insurance on homes in Detroit still costs a normal premium (if not higher than normal amount) even though you could potentially buy one for five figures. You couldn't rebuild for that amount, but the insurance company contracts are pretty rigid and insure for that purpose, and are priced accordingly.

Typically though, if you're willing to take on more risk, you can deviate from the dwelling coverage they assign to you. You may lose some supplemental coverage but you could lower your rates.

Former licensed agent here.

secondcor521

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Re: How much is your deductible on your home insurance?
« Reply #17 on: December 06, 2018, 10:22:13 AM »
Typically though, if you're willing to take on more risk, you can deviate from the dwelling coverage they assign to you. You may lose some supplemental coverage but you could lower your rates.

Former licensed agent here.

Can you confirm something for me?

I own my home.  Let's say the insurance company tells me it has a rebuild cost of $250K.  I buy a homeowner's policy with a $10K deductible and a $200K dwelling coverage and pay my premium like clockwork.

So I'm self insuring for the first $10K of any loss and (from $200K to rebuild cost) of a total loss, I think.  Is that latter half correct?

In other words, suppose 40% of my house burns down and costs $100K to rebuild.  I cover the first $10K and they cover the next $90K, right?  If my entire house burns down, I cover the first $10K, they cover the next $200K, and I cover the last $40K, right?

patchyfacialhair

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Re: How much is your deductible on your home insurance?
« Reply #18 on: December 06, 2018, 11:14:53 AM »
Typically though, if you're willing to take on more risk, you can deviate from the dwelling coverage they assign to you. You may lose some supplemental coverage but you could lower your rates.

Former licensed agent here.

Can you confirm something for me?

I own my home.  Let's say the insurance company tells me it has a rebuild cost of $250K.  I buy a homeowner's policy with a $10K deductible and a $200K dwelling coverage and pay my premium like clockwork.

So I'm self insuring for the first $10K of any loss and (from $200K to rebuild cost) of a total loss, I think.  Is that latter half correct?

In other words, suppose 40% of my house burns down and costs $100K to rebuild.  I cover the first $10K and they cover the next $90K, right?  If my entire house burns down, I cover the first $10K, they cover the next $200K, and I cover the last $40K, right?

You may be correct.

The only possible issue would be if your policy includes something called a "coinsurance clause." This is not the same thing as coinsurance for health insurance. In fact, it's entirely different. It basically speaks to a certain absolute minimum you can keep for dwelling coverage, where if you go below that amount, your share of the loss increases. Not all companies still have a clause like this in their insurance, so you'll want to review with your agent and read your contract.

This web page does a great job of explaining in more detail what would happen if a property coinsurance clause is triggered:
https://www.scottsimmonds.com/blog/business-insurance/coinsurance/
(no idea who this guy is, but it was the first result from a google search)

If your contract does not have a coinsurance clause, then your explanation is spot on.


AlexMar

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Re: How much is your deductible on your home insurance?
« Reply #19 on: December 06, 2018, 02:10:21 PM »
As high as they will let me.  MMM did a great article on this very topic.  Insurance is a tax for people bad at math.  It's for catastrophic losses.  So I insure against catastrophe.  I don't buy travel insurance, and I have the highest deductibles I can get on car/home.

frugaldrummer

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Re: How much is your deductible on your home insurance?
« Reply #20 on: December 08, 2018, 11:11:50 AM »
Related question: how much insurance for contents of house? I was looking at my policy recently and seems like those amounts were high, even accounting for the fact that in a catastrophic fire there could be four cars worth about $100k total at risk (multi generational house). I'm sure the clothes and furniture in my house would not be that much to replace, appliances a bit more but not high end. How does one figure this? Am I missing other things in the household contents? (No valuable jewelry)

neophyte

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Re: How much is your deductible on your home insurance?
« Reply #21 on: December 08, 2018, 11:28:46 AM »
I tried to make it as high as the insurance would allow which was 10 or 12k, but my mortgage company forced me to lower it to 3k even though I could show them proof of funds to cover it. I was pissed.

foghorn

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Re: How much is your deductible on your home insurance?
« Reply #22 on: December 08, 2018, 01:24:14 PM »
My deductible is set at 1% of the home value.  The house is worth about $330,000 - so the deductible is about $3,300.


Duke03

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Re: How much is your deductible on your home insurance?
« Reply #23 on: December 08, 2018, 01:56:21 PM »
Mine is set at $1000 across the board.  My house is insured for $425,000 and it cost me $875 a year.  At that cost point it doesn't make sense to raise my deductible thousands of dollars a year to save $100.

DreamFIRE

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Re: How much is your deductible on your home insurance?
« Reply #24 on: December 08, 2018, 03:22:57 PM »
$1000 here.  It was $500, but I increased it several year ago due to the increasing rates.   It was $100 on my first home back over 25 years ago.

Since they keep increasing my coverage to about 50% above the market value of my home, plus another 25% rebuilding coverage on top of that, that's also increasing my rates.

Not that you asked for my opinion/thoughts, but keep in mind that insurance companies typically do not care about the market value of your home at all. Nor do they care about the taxable/assessed value. They only care about what it would cost to rebuild. It's why insurance on homes in Detroit still costs a normal premium (if not higher than normal amount) even though you could potentially buy one for five figures. You couldn't rebuild for that amount, but the insurance company contracts are pretty rigid and insure for that purpose, and are priced accordingly.

Typically though, if you're willing to take on more risk, you can deviate from the dwelling coverage they assign to you. You may lose some supplemental coverage but you could lower your rates.

Former licensed agent here.

Yep, and I mentioned "building" as well.  I did a little research online on it 7 months ago when it came up for renewal, and some people mentioned not being able to get their coverage reduced.  I decided to go ahead and take the hit and maybe follow up next year.

Mine is set at $1000 across the board.  My house is insured for $425,000 and it cost me $875 a year.  At that cost point it doesn't make sense to raise my deductible thousands of dollars a year to save $100.

Same deductible here for a house insured for half that much, and my premium is only $20 less than yours.  I've even got no claims discount, longevity discount, and car/home discount.

patchyfacialhair

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Re: How much is your deductible on your home insurance?
« Reply #25 on: December 17, 2018, 09:40:50 AM »
Related question: how much insurance for contents of house? I was looking at my policy recently and seems like those amounts were high, even accounting for the fact that in a catastrophic fire there could be four cars worth about $100k total at risk (multi generational house). I'm sure the clothes and furniture in my house would not be that much to replace, appliances a bit more but not high end. How does one figure this? Am I missing other things in the household contents? (No valuable jewelry)

Most contract have only a couple of options for selecting personal belongings coverage on a Homeowner's policy. I usually see something like your options are either 50% or 70% of the dwelling limit.

Also, you mentioned cars as valuable assets; keep in mind that most home policies specifically exclude coverage for cars, even if they burn down in a house fire. Comprehensive coverage (if you carry it) would pay it from the Auto policy in that case.

Regarding your other questions, I calculated my family's coverage need by doing a thought exercise: If my house burned down right now, and I went to buy EVERYTHING again, brand new, at non-sale prices, how much would that add up to? I figured in hallween decorations, cutlery, clothes, furniture, spices in the spice rack, etc.

I came up with a figure that was half of the lowest amount of coverage I could get, so I went with that lowest amount option. It helps that our fanciest clothes would be maybe a dress for her at $150 non sale and a suit for me at $300 non sale. Our plates are all Target/Walmart quality, and our decorations are Big Lots/Dollar Store quality.

Dragonswan

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Re: How much is your deductible on your home insurance?
« Reply #26 on: December 18, 2018, 02:53:41 PM »
1/2 percent of value for normal claims, 2% for earthquakes.  Contents are insured at 75% of home value.

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Re: How much is your deductible on your home insurance?
« Reply #27 on: December 19, 2018, 02:34:10 PM »
It depends where you live. You have to do the math to see what is worth it. I keep mine around 2,000 because hail claims are so common here (2 in the past 6 years) . 2 years ago I had to file a claim around $20,000 for siding , roof, windows, shed etc. I am glad my deductible was low .

500 - or 100 my monthly rate would of been increased quite a bit but 2,000 seems to be  a good middle ground for me personally.