We don’t like to think of the possibility of having to file a homeowner’s insurance claim for a loss on our Northern Virginia real estate, but it’s still good to have the best financial plan in place to be prepared. One way to control our insurance costs and risk is through the deductible.
Insurance is meant to shift the risk of loss to a company or individual in exchange for a premium. Most policies have a deductible, which is a dollar amount the insured pays out of pocket before the insurance will start covering the cost of the loss.
To manage the cost of insurance premiums, policy holders can adjust their deductibles. A lower deductible costs less money out of pocket if a loss occurs, but means higher premiums. A higher deductible brings lower premiums but the insured must pay a larger out of pocket amount before the rest will be covered by the insurance company.
Here’s a quick example: A small fire in a $300,000 home that resulted in $2,500 of damage. The insurance deductible was 1%, or $3000, so the insured would be responsible for covering the total amount of that loss. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a lowering of the deductible might be good to consider.
It is a good idea to review your deductible with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate. Keep your Northern Virginia home safe, and your wallet protected as well!
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