What Is a Homeowners Insurance Deductible?
Homeowners insurance guarantees the cost of repairing damage to a home caused by an accident or an act of nature. However, your insurance policy includes a deductible, and this is the amount you must pay out of pocket before the insurance pays the rest. Homeowners often choose the amount of their deductibles to suit their own financial means.
Significance
Choose an insurance policy based upon your own needs. Most buyers do not take the time to ask about specific features of their policies that might reduce their ability to collect when damage occurs to their homes. You can choose a higher deductible and reduce the cost of your premium with most policies.
Function
Insurance companies use deductibles to discourage frivolous claims. A common deductible amount is $500 for repairs to cosmetic features, such as carpeting or painting, and a larger deductible of $1,000 or more for repairs to structure or roofing. When a homeowner must pay a portion of the deductible, he often maintains the property better and pays for small repairs himself.
Time Frame
Most homeowners' insurance policies set a time limit for filing a claim. This is to encourage the owner to file early, before the initial damage causes more costly problems. While it is easy to determine damage from a fire, a homeowner may not realize her roof suffered damaged in a hailstorm until she finds evidence of water damage inside the home. For this reason, most policies require that all claims be filed within 1 year of the date of damage.
Identification
The insurance company will send an adjuster to the home to inspect the damage and offer an estimate for the cost of the repairs. Alternately, the homeowner will solicit one or more estimates for repairs and submit them to the insurance company.
Potential
Repairmen and contractors know that homeowners often pay deductibles out of their own pocket and will inflate their estimates to compensate the homeowner. For example, if the cost to repair a roof is $4,000, but the homeowner must pay a $1,000 deductible, the roofing contractor may submit an estimate of $5,000 for the work, but he will charge the homeowner only the lesser amount of $4,000. In this manner, the homeowner pays nothing. However, this is considered fraud.
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