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What is a homeowners insurance deductible

When disaster strikes, the cost of your damages and losses can be exorbitant. This is why it is so important for homeowners to protect themselves and their belongings with homeowners insurance.

The amount of money you have to pay to cover repairing and replacing your items when you file a claim depends on your deductible. It is always important to consider the insurance deductible before committing to a new insurance plan.

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What is a deductible?

An important part of your homeowners insurance policy is your deductible. This applies not just to homeowners insurance but also renters insurance, car insurance and life insurance.

A homeowners deductible is the amount that you are required to pay before your insurance coverage kicks in to pay for qualified losses. Unless your plan specifies otherwise, a deductible is not usually reimbursed; it’s a minimum amount you pay toward the total damages. Once you pay your deductible, you can file a claim with the insurance company to pay the rest.

For example, if you have a $5,000 deductible and the total damages for your home are $20,000, you would pay $500, and your insurance claim would pay the remaining $15,000.

Types of homeowners insurance deductibles

Insurance companies can offer different kinds of deductibles, but they most commonly present them as either a dollar-amount deductible or a percentage-based deductible. A dollar-amount deductible is the most common because it provides one set figure that you will have to pay.

A percentage-based deductible requires you to pay a percentage of the total damages. For example, if you have a 10% deductible and the total losses are $10,000, you will have to pay $1,000 before your insurance company will help with the rest.

There may be times when a percentage-based deductible is best. Depending on the total cost of the damage, it’s possible that a percentage of the damages is cheaper than the total cost of the project. If the total damages are $5,000 and you have a 2% deductible, you would only have to pay $100 instead of the average $500 or $1,000 flat-rate deductibles.

What are disaster deductibles?

Not every type of disaster is covered by your homeowners insurance policy. The disaster deductible does not include what is normally covered under your insurance; it is a separate form of coverage that is designed to cover what your insurance does not.

Disaster loss applies to damages that occur within an area that has been formally declared as a federal disaster area by the president. This is often the result of natural disasters such as hurricanes, wildfires and floods.

These deductibles are similar to casualty loss in that they are also tax-deductible. However, disaster deductibles offer more options for filing and claiming your tax refund.

Disaster deductibles also apply to commercial property owners and renters.

How to choose which deductible is right for you

While it may not seem like a big deal when you are purchasing your insurance, the kind of deductible you choose can make an enormous difference in how much you have to pay in an emergency. If you aren’t careful, your insurance deductible can end up costing you more than your losses.

The kind of home you own will determine how much coverage you need. More expensive homes or people with more expensive items will need more coverage to fully replace or repair damages.

It’s also important to inventory your belongings and calculate the estimated value. You can use this figure when creating your homeowners insurance policy to ensure you purchase enough coverage for your things.

Once you determine how much coverage you need, you can determine what kind of deductible is most appropriate for you.

How deductibles affect your premium

When you buy an insurance plan, there are different deductibles that are offered with each plan. The lower your deductible, the higher your monthly premium will be. Standard deductibles are generally between $500 and $2000.

If you have filed claims in the past, this can also affect the cost of your coverage and what options you are given for your deductible. Even if an accident was not your fault, insurance companies will use your insurance claim history to assess whether you are a high-risk candidate for homeowners insurance. You might have to choose a higher deductible to afford coverage.

For some homeowners, insurance is only an option if it comes with a low monthly premium. Tight finances and a strict monthly budget can reduce your options and make affordability your top priority for coverage.

Either way, it’s crucial that you choose a deductible that you will be able to afford. If a fire sweeps through your home and leaves you without a thing in the world, the last thing you want to worry about is paying a $5,000 deductible.

Disasters aren’t common, but they do happen. That’s why it’s important to make sure you and your home are protected with the best homeowners insurance coverage for your home.

The post What is a homeowners insurance deductible appeared first on The Simple Dollar.

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How to Insure Your Tiny House

Over the past few years, tiny homes have gone from a limited trend to a dedicated way of life for many. There has been a 67% increase in the number of tiny homes from 2017 to 2020. Many people love the simplicity of a small home with low upkeep and a minimalist approach to personal property. Today, there are more than 10,000 tiny homes in the United States. Varying greatly in size, type, quality and detail, tiny homes cost anywhere from $20,000 to $200,000.

Regardless of the size or tiny home cost, home insurance is a must. Even if your home is 200 square feet, it is providing necessary shelter and housing personal property of value. In the unfortunate event that there is damage or destruction to your tiny home, you will need home insurance coverage to repair or replace the home and its contents. Not having that coverage could result in financial hardship and simply is not worth the risk.

Insuring a non-standard home type, like a tiny home, isn’t as difficult as it once was. As more insurance companies have added tiny home policies into their coverage options, tiny homeowners now have a variety of options.

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Is tiny house insurance required?

Whether or not home insurance is required on your tiny home or not will depend on your state and whether or not you have a mortgage on the home. While most states don’t require homeowners insurance by law, there are some exceptions. For example, if your tiny home will be mobile, you will be required to have whatever automotive coverage your state requires. Additionally, if your tiny home is financed by a mortgage lender, the lender may require both homeowners insurance coverage and auto insurance coverage if the home is mobile.

Even if you are not required to have house insurance on your tiny home, we do not recommend that you go without it. We suggest seeking sufficient coverage to repair or replace your home and belongings if needed.

Types of tiny house insurance

Much like the tiny homes themselves, tiny home insurance is unique. Many tiny homes are mobile, meaning that they are on wheels and can be easily moved from one location to another via highway. Other tiny homes are fixed to a permanent foundation. Your home insurance policy type will depend on the type of tiny home you own.

Insurance for a stationary tiny house

Some tiny homes are permanently fixed to a foundation like a regular-sized home. If your tiny home is stationary, you may be able to get a regular home insurance policy or a policy that is specific to tiny homes. For these policies, the insurance provider may require an on-site inspection to ensure the home will not be moved.

Insurance for a mobile tiny house

Things get a little tricker when insuring a mobile tiny home. This mobile tiny home is a sort of a hybrid between a resident and a recreational vehicle.

Tiny home-specific insurance provides options for the mobile tiny home dwellers. This coverage typically covers you like a regular homeowners insurance policy would until the home is in tow, at which time you should have a policy endorsement that allows auto insurance to kick in.

There are some important things to consider when buying a mobile tiny house. Does the home classify as an RV? In other words, is it RVIA certified? Will you be living in the home 365 days a year? There are HUD specifications that you cannot live in an RV for more than 30 days at a time in a fixed location. Speak with insurance agents in your area before buying your tiny home.

Insurance for a tiny house you built yourself

Many regular homeowner’s policies will only cover homes built by certified builders. But one of the perks of tiny homes is that they are small enough to often be built by the homeowner. Fortunately, with tiny house specific coverage, you can get coverage even if you built the place yourself.

Other tiny house insurance options

If the above options don’t work for you or are not available in your area, we recommend checking into mobile/manufactured home policies.

How much does tiny house insurance cost?

Annual premiums for tiny home insurance can range anywhere from $600 to $1,200. Where your insurance premium will fall within this range depends on several important factors like size, value, construction type, location and tiny home type.

If you are going to be a tiny home dweller, you must treat it as you would any home. It is your shelter and the place where most of your personal property resides. If that home was destroyed, it would be critical to your well-being to be able to replace it without putting yourself in financial hardship. This is where your home insurance becomes vital and worth its cost.

Before investing in your tiny home, speak with multiple insurance agents in your area to be sure you get sufficient coverage.

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The post How to Insure Your Tiny House appeared first on The Simple Dollar.

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