Roberts Insurance Group Blog
A frequent question we get from Georgia homeowners is: What deductible do you recommend?
The answer to this question isn't going to be the same for every Georgia homeowner or every home insurance policy. However, becoming educated on the different types of deductibles and their effect on your home insurance will help you make the best decision for you and your family.
What Type of Deductibles Are Available?
For home insurance in Georgia, there are typically 2 types of deductibles to choose from: a percentage-based deductible or a flat deductible.
A percentage-based deductible is calculated by a specific percentage of your dwelling coverage. You can typically choose 1/2%, 1%, 2%.. all the way up to 5%. This means that if your home's dwelling coverage is $500,000 and you have a 1% deductible, your current deductible is $5,000.
The main advantage to carrying a percentage-based deductible is a discounted premium. Since your share of the insurance will never change, the insurance company will typically give you a cheaper premium. In the $500,000 to 1% deductible example above, this would be less expensive than carrying a flat $5,000 deductible. Why? Because over time, the coverages on your policy will increase to keep up with inflation. For instance, a home covered for $500,000 today may be covered for $600,000 10 years down the road. Someone with a flat deductible will still only be responsible for $5,000 while someone with a percentage-based deductible would be responsible for the first $6,000 in damages.
The main disadvantage of carrying a percentage-based deductible is that your deductible will increase over time and it can lead to major surprises when it comes time to file a claim. I have seen in the past where someone files a claim thinking they have a $2,500 deductible and it ends up being closer to $4,000, which severely impacts what the insured receives as a pay out on their policy. This is the main reason that we tend to steer away from these deductibles. The savings on premium is typically very minimal and not worth it in the long run.
The main advantage of carrying a flat deductible is that you will always have the same share of insurance, unless you decide to make changes down the road. If you have a $1,000 deductible today, you'll still have that in 10 years. This makes understanding your policy so much easier in my opinion and leads to much happier clients when it is time to file a claim.
General/All Peril Deductible vs Wind/Hail Deductible
Another thing to be aware of when it comes to choosing your deductible for your home insurance policy in Georgia is that many companies have 2 separate deductibles. One that applies for weather damage (Wind/Hail) and another that applies to all other causes of loss (All Peril or General).
Due to the surge in roof claims in Georgia over the past 10 years, we're starting to see many policies in the marketplace that are written with significantly higher wind/hail deductibles. This is typically done as a cost-saving mechanism for most Georgia homeowners, although some homeowners near the coast will be forced to take a higher deductible for wind/hail due to the high winds in their area.
Unless your carrier requires you to carry a larger deductible for wind/hail due to your location, we always recommend keeping it the same as your all peril/general deductible. The savings on your premium is typically very minimal and not worth it, in my opinion. Also, the easier your policy is to understand, the less surprises you'll have when it comes time to file a claim.
So What Deductible Is Right For You?
Now that we've cleared the air and made the case for carrying a flat deductible for all losses, it's time to figure out what deductible you should carry. $1,000? $2,000? $5,000?
The truth is, it is all going to come down to personal preference and your household's finances. For example, if you do not have $5,000 in your emergency fund, carrying a $5,000 deductible would not make sense.
Typically, homeowners in Georgia with a $150,000 to $500,000 replacement cost will carry $1,000 to $2,500 for their deductible. Homes $500,000 to $1,000,000 are somewhere in the $1,500 to $5,000 range and homes $1,000,000 and above will be $2,500 to $5,000. Again, it is always going to come down to each individual household's preference and finances. We recommend having your agent or broker gives you pricing at different deductible levels so that you can do a proper cost-benefit analysis to see what option makes the most sense for you and your family.
The Roberts Insurance Group is a Georgia Insurance Broker specializing in commercial and personal insurance for our clients throughout the state of Georgia. We help our clients lower their cost of insurance with our superior claim and risk management expertise and our extensive carrier access. We are in the business of building relationships with our clients to help them grow and succeed. Contact us today to see what we can do for your family or business.