As a home or property owner, knowing how much your home insurance policy will cost you upfront becomes imperative. However, most homeowners fail to consider how much it will cost them if they need to submit a claim for reimbursement of damage. Because of this, it’s crucial to understand how deductibles work and how yours can influence your insurance policy.
You may have recently asked yourself questions like, “what is the home insurance deductible average in Canada?”.
By reading this article, you will learn how a home insurance deductible works, the various types and the cost of the average home insurance deductible in Canada. So, make sure you scroll down to the end to make the most out of this article. If you’re already familiar with how home insurance deductibles work, it’s time to start comparing plans — click here to learn more about how you can find affordable and reliable home insurance quotes with great deductibles.
What is a Home Insurance Deductible?
The whole point of a home insurance policy is to cover the expenses that may incur due to risks that are out of your capabilities to pay for. And a home insurance deductible keeps your insurance premium low by enabling the insurance company to avoid fake claims.
A home insurance deductible can be a fixed number or a percentage amount that your insurer requires you to pay before reimbursing the remaining amount of your claim. The claim payment that your insurance company pays you is the amount for the damages and losses incurred minus the deductible.
How Does a Home Insurance Deductible Work?
The home insurance deductible is a fixed out-of-pocket fee that you have to pay from your own pocket while your insurance company pays for the rest after a claim has been made and accepted.
The claim cheque you then receive is the amount for damages and losses that your house or property suffered minus the deductible.
For instance, suppose you’ve purchased a home insurance policy with a total cover of $50,000 and a deductible of $1,000. So, in case your house suffers $50,000 worth of property damage after a heavy hailstorm, you will first have to shell out $1,000 before getting reimbursed with the remaining insurance amount for the house repair, i.e., $49,000 (insurance cover minus the deductible).
It’s pertinent we mention here that you get the liberty to choose both your deductible rate and its amount at the time of purchasing your house. Also, you can change it any time during your policy term.
The amount you pay in insurance premiums directly affects your deductible policy. If your deductible is lower, you pay more in the form of insurance premiums. At the same time, a home insurance policy with a higher deductible will lower the cost of insurance premiums. Nevertheless, a higher deductible could also prove to be unaffordable should you file a claim.
Deductibles are paid on a per-claim basis — for instance, if your home was damaged in two unavoidable events that were a few months apart, you would have to pay two separate deductibles.
Types of Home Insurance Deductibles
Insurance companies use a wide variety of factors to determine the price of a home insurance policy premium and deductible. One of these factors are local risks.
Therefore, home insurance policies from different insurance companies may have provisions for different deductibles that may apply to various risks.
Need a closer look? Here are some prevailing types of home insurance deductibles:
The crime deductible is usually applicable on vacation and rental properties since owners are not around to keep their homes safe. They are more prone to crimes like vandalism, theft, burglary, and any such crime listed in the insurance policy.
These deductibles are usually available from $2,500 onwards and can go up to $10,000. Crime deductibles are also applicable on properties shared by unrelated persons, such as in a home-sharing program.
Earthquake deductibles apply to earthquake insurance policies that cover the damage and loss directly caused by an earthquake.
Given that earthquakes have tendencies to cause massive damage and loss in a larger geographical area, the deductible applicable is also high. Earthquake deductibles commonly cost approximately 15% to 20% of your dwelling coverage.
Most of the insurance companies provide coverage for inland floods. So, if you have this type of coverage against inland floods, you can file a claim if your property gets damaged by one.
It covers you against a lot of risks, including sewer backup caused by inland floods. The flood deductible options start from $2,500 and can go up to $25,000.
Some home insurance policies also cover glass damage in your home. The deductible in such cases is usually low.
If you reside in an area with a higher than usual risk of hailstorms, you can be eligible for coverage against damage caused by hailstorms.
However, a hailstorm insurance deductible usually costs around $5,000.
The Average Home Insurance Deductible
Now it’s time to assess how much deductible for home insurance will cost you on average. The price of a home insurance deductible depends on many factors, including the insurer, your finances, location, and much more. However, most of the home insurance deductibles start from $1,000.
Since houses are getting more expensive each day, a typical deductible for home insurance can range from $1,000 to $2,000, occasionally even going higher than $2,500.
With the above in mind, you are now better equipped to determine how much your house insurance deductible should be. Remember that there are many forces at play, but mostly it depends on your savings and financial stability.
It’s pretty tempting to set a high deductible so that you pay less on a home insurance policy premium. However, it’s essential to set your deductibles to an amount that you can comfortably bear if you ever file a claim.
It’s also prudent to keep your future budgets and the risks of property damage in mind while purchasing a home insurance policy with a suitable deductible amount.