Homeowners Insurance - How to Balance Your Deductibles and Premiums
It is important that you safeguard your home with homeowners insurance and save yourself and your family the embarrassment that follows a sudden and unexpected disaster.
Therefore, if you take homeowners insurance, many options are open to you to choose from in the levels of coverage you want to carry.
Your ability to ensure adequate levels of coverage is the key to being a responsible homeowner, but you must also make intelligent decisions between what you pay to your insurance company on a regular basis and what you pay whenever there is a sudden occurrence in your home necessitating the use of your policy.
Ensure that your deductibles and premiums are adequately balanced so that you will benefit in the end.
The deductible on your homeowners insurance policy is the amount of money you pay every time an occurrence at your home necessitates the use of your policy.
Deductibles can be calculated as either a set dollar amount or a percentage per incident.
This deductible has no relationship with the amount of coverage you take on your home; it is simply the amount of money you can afford to pay out-of-pocket every time you need to make a claim.
The premium on your homeowners insurance is the amount of money you pay either on a monthly, quarterly or annual basis.
It is calculated as a percentage of the coverage you take on your home.
Your payments may be part of your mortgage payment and are paid to your insurance company from an escrow account.
Your premiums can be paid directly to your insurance company.
Most times, the higher the coverage you maintain on your home, the higher your premiums will be.
In the same way, the lower your deductible, the higher your premium will be.
In view of the above, it is important to know that when you want to balance the amount of your deductible against the premium costs on a regular basis, you must consider several factors.
Firstly, you must consider that the average homeowner makes only one claim on their homeowners insurance policy every five years.
With this in mind, you must balance out what a higher deductible may cost you if you make payments only every five years, against the corresponding amount your premium would be reduced by if you carry a higher deductible.
If saving money is your goal, it may very well benefit you to carry a higher deductible and save money on your premiums in the meantime.
Secondly, you must consider your present budget.
While it may be beneficial to you to reduce recurring costs by lowering your premium while raising your deductible, this may not be practical to your overall budget.
If you raise your premium to, say, $1,200, is that a reasonable amount you can come up with on a short notice to pay out if it is necessary to use your homeowners insurance policy to cover a claim? Many households do not have this amount of money on-hand in an instant, so to ensure that you can contribute your portion of a claim when necessary, it is advisable you carry a lower deductible while paying more on a monthly basis may be more practical to your household.
Finally, you must anticipate what types of claims might be necessary for your home.
Check the current structure of your home.
Evaluate what risks might be inherent.
It is impossible to see the future, but a rational approach can help bring more benefit to your budget.
Always look at your homeowners insurance policy as a balancing act - balancing the right amount of coverage with expenses that fit the finances unique to your home.
Therefore, if you take homeowners insurance, many options are open to you to choose from in the levels of coverage you want to carry.
Your ability to ensure adequate levels of coverage is the key to being a responsible homeowner, but you must also make intelligent decisions between what you pay to your insurance company on a regular basis and what you pay whenever there is a sudden occurrence in your home necessitating the use of your policy.
Ensure that your deductibles and premiums are adequately balanced so that you will benefit in the end.
The deductible on your homeowners insurance policy is the amount of money you pay every time an occurrence at your home necessitates the use of your policy.
Deductibles can be calculated as either a set dollar amount or a percentage per incident.
This deductible has no relationship with the amount of coverage you take on your home; it is simply the amount of money you can afford to pay out-of-pocket every time you need to make a claim.
The premium on your homeowners insurance is the amount of money you pay either on a monthly, quarterly or annual basis.
It is calculated as a percentage of the coverage you take on your home.
Your payments may be part of your mortgage payment and are paid to your insurance company from an escrow account.
Your premiums can be paid directly to your insurance company.
Most times, the higher the coverage you maintain on your home, the higher your premiums will be.
In the same way, the lower your deductible, the higher your premium will be.
In view of the above, it is important to know that when you want to balance the amount of your deductible against the premium costs on a regular basis, you must consider several factors.
Firstly, you must consider that the average homeowner makes only one claim on their homeowners insurance policy every five years.
With this in mind, you must balance out what a higher deductible may cost you if you make payments only every five years, against the corresponding amount your premium would be reduced by if you carry a higher deductible.
If saving money is your goal, it may very well benefit you to carry a higher deductible and save money on your premiums in the meantime.
Secondly, you must consider your present budget.
While it may be beneficial to you to reduce recurring costs by lowering your premium while raising your deductible, this may not be practical to your overall budget.
If you raise your premium to, say, $1,200, is that a reasonable amount you can come up with on a short notice to pay out if it is necessary to use your homeowners insurance policy to cover a claim? Many households do not have this amount of money on-hand in an instant, so to ensure that you can contribute your portion of a claim when necessary, it is advisable you carry a lower deductible while paying more on a monthly basis may be more practical to your household.
Finally, you must anticipate what types of claims might be necessary for your home.
Check the current structure of your home.
Evaluate what risks might be inherent.
It is impossible to see the future, but a rational approach can help bring more benefit to your budget.
Always look at your homeowners insurance policy as a balancing act - balancing the right amount of coverage with expenses that fit the finances unique to your home.
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