How Does A Deductible Work In Home Insurance?

  1. 12689 POINTS
    Ted Ratliff
    Owner, SFS Associates,
    It works the same as any other deductible.  You must pay whatever the deductible is before the insurance company will pay.  For example, you have a $500 TV destroyed by a covered peril.  If your deductible is $1000 then it would not make sense to turn in a claim.  If you have a $20,000 loss due to a covered peril, you would be responsible for $1000 and the insurance company would pay $19000.
    Answered on June 11, 2013
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  2. 2777 POINTS
    Terry A. McCarthy, CLU, ChFC
    President, Insurance Associates Agency Inc., West Chester, OH
    A deductible is one of the ways your insurance carrier helps to keep insurance affordable. There are three basic ways your financial participation in insurance can work. First, you agree to pay premium for a policy. Second, in most policies, you agree to pay the first dollars of a property loss and that is what we call the "deductible". (Don't confuse a deductible with a co-payment agreement.) You also agree, whether you know it or not, to be responsible for every dollar of loss above and beyond the limits and amounts of insurance you purchased. These three are the ways you agree to pay for the losses you suffer. Most of us only encounter the deductible and premium payments as typical methods of paying for our losses. A deductible helps the carrier avoid the expense of investigating, processing, and paying small claims. A small claims, say under $500, may cost as much to investigate, process and pay with a check or draft as the cost of the actual loss has cost the carrier. A deductible is a way for your insurance to cost less and a way for you to afford the cost of insurance. It is also a way for the carrier to avoid the costly process of paying small losses. When the cost of the repair or replacement of the property is determined, your deductible is subtracted from the final payment and you become responsible to contribute this amount to obtain the repair or replacement of your lost property. Deductibles are rather straightforward and I hope that the latter helps you understand the way a deductible works and why it is included as a part of your property insurance policy.
    Answered on October 13, 2015
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