Having an unaffordable home insurance deductible can be troublesome for many American homeowners when they realize they can’t cover their share of home repairs in a claim. Let’s investigate what happens if you can’t afford your deductibles.
The ramifications of rising home insurance rates
Although a significant issue in Florida, rising home insurance rates are becoming increasingly problematic nationally. One issue is when an insured has a deductible they can’t afford to cover in a claim.
Increasing your deductibles can lower your premiums, making your coverage more affordable. That may be really important to anyone who needs to have homeowners insurance to stay in compliance with their lender’s requirements and avoid expensive force-placed insurance.
However, higher deductibles can cause problems should you have a catastrophic claim. This may be especially true of hurricane insurance deductibles, which are often a percentage of your dwelling coverage and can be tens of thousands of dollars.
If you can't afford the deductible when it’s time to make repairs to a severely damaged home, then your choices become limited – and honestly, bad. We don’t recommend you do any of these, but you may have to:
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Dip into savings. Hopefully, you have enough savings to cover repairs, but your costs could be astronomical in a total loss. Some people have to take money out of their 401k to make their homes inhabitable again.
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Secure a loan. A home equity line of credit can help you cover the cost of repairs. Another option is disaster assistance from the Small Business Administration.
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Skip some repairs. While it is your house, leaving it in a state of disrepair is less than ideal in terms of your family’s safety and comfort. Also, unrepaired damage could cause your insurance company to cancel or nonrenew your policy if your damaged home no longer meets their underwriting guidelines.
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Sell your home. If your home is unlivable even after your insurer covers its portion of your repairs, then you may have to sell. Unfortunately, you’ll be selling your home in its current condition, so it probably won’t fetch the same price as one that’s been wholly restored.
All of these choices can have devastating implications that might impact you and your family for years.
How to better protect your home
While high deductibles keep your premiums down so you can have the home insurance your lender requires, they may make things doubly difficult when you have a significant claim. You need to carefully consider what you can really afford to pay out-of-pocket in the worst case scenario before increasing your deductible.
We are ready to help
At Kin, we specialize in homeowners insurance in Arizona and coastal states like Florida and others around the Gulf of Mexico and the Southeast Atlantic. We can help you explore your options when it comes to home insurance.
Increasing your deductible may be an option, but it should be done only after careful consideration. If you have questions about your homeowners insurance, would like an insurance review, or a price quote, we invite you to contact us at Kin.
