Homeowner Insurance: Read the Fine Print

Homeowner Insurance: Read the Fine Print

 

A growing number of homeowners are facing sharply higher costs as more insurers change how they calculate deductibles, especially for damage caused by windstorms and other natural events.

 

The newer method of figuring deductibles is based on a percentage of the insured value of your home — typically between 1% and 5%, and even higher in earthquake zones.  With home prices soaring in many areas over recent years, this often works out to be far more costly to the homeowner than the traditional flat-dollar method of figuring deductibles, by which you pay the first $1,000 or so of home repairs.  As a result, homeowners increasingly are on the hook for thousands of dollars in repairs before the insurer pays any part of a claim.

 

As natural disasters threaten to drive up property losses in many parts of the country, insurers increasingly are passing along more of the financial risk to policyholders.  Many insurers that initially required wind and hurricane deductibles of 1% in coastal areas have recently raised them to as much as 5%, while also introducing the deductibles farther inland.

 

So far, only a tiny fraction of policies use percentage deductibles on standard perils such as fire and theft. But insurance regulators and experts say they expect percentage deductibles will continue to spread through the industry and affect many more homeowners on their standard policies, as insurers seek to limit the cost of claims. Already, some insurers have started offering percentage deductibles as an option for homeowners who want to reduce the size of their premiums.

 

Often times when insurers add the new deductibles, they explain them at renewal on the "declarations page" of the policy and sometimes in a separate notice, but many homeowners don't bother to read this.

 

So be advised:  READ THE FINE PRINT and the Declarations Page of your home owner insurance policy.