What Illinois Home and Auto Owners Need to Know about Deductibles
When insuring a home or vehicle, knowing how deductibles work ensures policyholders get the most out of their coverage. Deductibles are the amount a person pays as a share of damage costs. After that sum has been paid toward damages, the insurer covers the rest. However, there are limits, but these are outlined in the policy. When replacing personal belongings or repairing a home, the policyholder must pay it out of his or her pocket.
Deductibles are set as either a percentage of the insurance policy's total or as a specific dollar amount. If a person has a larger deductible, the premiums are usually lower. However, smaller deductibles come with bigger premiums. Deductibles are stated on the front page of a home or auto policy. If a person has a deductible of $1,000, that amount is subtracted from a claim. This means a loss of $20,000 is compensated as $19,000. When a policy is based on a percentage, the rate is calculated using the declared percentage against the home's insured value.
In several areas of the United States, deductibles have been on the rise. There are also special deductibles in areas of the country that are prone to hurricanes and other disasters when they occur. They usually are based on a percentage of the policy's limit, so they are higher than average. Property damage deductibles work in different ways than many other types of insurance. For auto and home coverage, the deductible applies for each claim. However, deductibles in hurricane-prone areas may only be applied per season instead of being applied for each incident. Percentages also apply to hail and earthquakes.
Raising Deductibles Saves Money
People who want to save money can raise their deductibles, which will result in lower premiums. This is true with both home and auto coverage. When deductibles are lowered with auto coverage, most people save a considerable amount on their premiums. However, keep in mind that lowering coverage amounts to save money is a bad idea. Liability insurance is crucial, and there are no deductibles for this part. Accidents can be costly, so consider the possibility of any assets that may be lost if the policy's maximum provisions do not cover the full cost of damages. With auto coverage, there are deductibles for comprehensive and property damage insurance.
Deductibles May Differ
Deductibles are different from one state to the next, and they also differ between various companies. This includes how they are implemented and how they are put into the policy's wording. As mentioned before, liability deductibles do not apply in auto coverage, and they also do not apply in homeowners coverage. They apply to incidents that do not put the homeowner in a place of liability. For example, the homeowner being sued would not result in a deductible, but extensive water damage from a burst pipe would activate the deductible.
Keep in mind that there is a difference between flooding and water damage. Flood insurance must be purchased separately, and it can only be purchased from the government's National Flood Insurance Program. Water damage is damage that does not occur from weather-related flooding. Burst pipes, leaky roofs and other similar issues are considered water damage. To learn more about these types of insurance and deductible options, give me a call.