Making Sense of Home Insurance Premiums and Deductibles

If you are in the market for reasonable home insurance premiums, your first question may be: how can I be sure that I have enough home insurance to protect myself and my family? Some homeowners are under-insured while others are over-insured. You have to make sure that you have the appropriate amount of home insurance. This means you must have a clear picture of the assets and possessions you own. The protection you are purchasing should be sufficient to fully replace everything in the event of a disaster which destroys your home.

Your home insurance premium depends on how much detail you provide to the insurance company about what you want to insure; your home structure and your personal possession first, and second the level of protection you want your home insurance to provide.

The amount of money you pay for your home insurance will also be affect by the method and schedule you choose to pay it. Your premium can be paid on either a monthly, quarterly or annual basis. Most home insurers will give you a substantial discount if you pay your home insurance premiums on an annual basis electronically or by credit card.

The deductible you carry represents the amount of risk you are willing to manage in the event of damage to your home; the higher the amount of deductible you carry, the lower your home insurance premiums will be. Insurance companies calculate the amount of your home insurance deductibles on a set dollar amount of a percentage rate. The amount of deductible you carry is not related to the amount of coverage your home insurance provides.

How do you decide how much of a deductible you should carry? To balance the amount of your home insurance premium against the amount of deductible you carry, consider first that this is a long term financial commitment. Whichever deductible you choose should be sufficient to cover the cost of a minor repair to prevent you from filing a small claim, which can pose a threat to your home insurance policy being renewed.

Statistics show that on an average there is one claim made by homeowners every five years so carrying a deductible of $1,000 may not be the best choice. On the other hand, if you carry a deductible of $500 and have a repair to your home that costs $400, you will not need to file a claim.