Home insurance and deductibles, what you need to know.
Buying a home is such an outstanding purchase for most of us that it will often take us up to thirty years to pay. It is strange but when you start spending that kind of money it can begin to lose it’s value. We can easily start saying, well what the heck! Spending a little more won’t make a difference. Bank managers and salespeople know this. Which is why they try to sell you all kinds of insurance products at the time of purchase. When I bought my first house the manager pretty much told me that if I didn’t take on this life insurance he was selling me he wouldn’t approve my mortgage. I was twenty one, only six months in my current job and with no credit history, so I bought the life insurance, got my mortgage approved and cancelled the insurance a month later.
Banks and finance advisers will sell you no end of insurance products, mortgage insurance, life insurance, medical insurance and of course home insurance. How can you know what to buy and how much to spend on insurance? It is a safe choice to spend a substantial amount on house insurance. It is after all your largest asset you need to protect it. The only problem is that home insurance is very expensive, how can you make substantial savings on your home insurance. A great way of reducing the premium on your home insurance is taking on well chosen deductibles on your home insurance.
What are home insurance deductibles? As you probably guessed, deductibles deduct a certain amount off any home insurance. This is how they work. When you agree to have a deductible on a certain coverage you agree to pay the firs xyz dollars of any claim. For example if your house gets burnt down and you have a thousand dollar deductible, you will pay for the first 1,000 dollars in damages. Deductibles are very popular with insurance companies for two good reasons. One, when clients have to pay the first xyz amount on a claim it is very good incentive to not bother presenting the claim to start with. Two, the insurance company has to actually spend less on you as a client than if you didn’t have the deductible. For this reason insurance companies are happy to provide savings if you agree to medium to high deductibles.
The key to smart investment in home insurance deductibles is to get them in areas of coverage that are already somewhat covered by another insurance or protection. Often we have insurances we don’t even think about, like those inclued in credit cards, auto loans and umbrella insurances. Umbrella insurances provide coverage for when the coverage of the insurance company is not sufficient. If you are already covered in a certain area of coverage you can choose a very high deductible that will bring down your house insurance premium.