Thursday, September 22, 2011

Tante Angela Bandung

Homeowners Insurance: Deductibles and Home Maintenance

What deductible should you carry on your Homeowners Insurance? What does home maintenance have to do with the deductible on your Homeowners Insurance? Home maintenance, the deductible on your Homeowners Insurance and the price you pay for that Homeowners Insurance all go hand in hand.

Years ago, people would only use their Homeowners Insurance in the event of a catastrophic loss: their house burned down, or burglars stole all their belongings. It was a common rule of thumb that homeowners would use their insurance on the average, two point something times during their lifetime. If someone backed into the side of the garage on the way to work, they would take care of it and not submit a claim. Because of that, insurance companies did not penalize homeowners for using their insurance.

Nowadays that mindset is changing. Many people feel that since they are paying for the insurance, if the occasion arises, they are going to submit a claim. If they are only going to get five dollars after the deductible, they are still going to make the claim. The insurance companies are tracking these losses. Now they are starting to increase the cost of insurance for those people that are making numerous claims, and they are even nonrenewing policies for homeowners who have multiple claims. The insurance companies feel that homeowners should not be using their insurance for home maintenance.

Insurance companies are also phasing out lower deductibles. Some companies no longer have a $100 deductible or $250 deductible. The $500 deductible could be next. Insurance companies are now adding a 1% or 2% deductible - 1% or 2% of the dwelling amount - the amount you are insuring your house for. If you insure your home for $500,000, a one percent deductible would be five thousand dollars. A two percent deductible on that same house would be ten thousand dollars! You can see that the insurance companies are trying to do away with small claims.

That is not necessarily a bad thing. Some insurance companies will charge for a deductible lower than the standard deductible. On the other hand, they will discount for a deductible higher than the standard deductible. In this age of rising costs, taking a higher deductible might make good sense. I strongly urge you to discuss the deductible options your insurance company has available with your insurance agent.

So what does this have to do with Home Maintenance? If you come home from work some night and discover your house filled with smoke, you may have suffered a "puff back". Your clogged furnace exhaust just filled your house with oily smoke instead of going up the chimney. Now you have to have your walls and furniture cleaned. Maybe your clothes have been smoke damaged. You probably could have prevented this disaster by having your furnace cleaned and serviced.

Maintaining your home could prevent a number of costly claims. Have your furnace cleaned and serviced. Replace worn shingles on your roof. Replace the hoses on your washing machine. You may prevent claims, avoid large out of pocket expenses, and afford a higher deductible which could in turn lower the cost of your homeowners insurance.

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