Insurance, Personal Finance 

1% Deductible Rule for Home Insurance

Email  Print Print  

I recently received an interesting letter from my lender, BB&T, about how the deductible on my homeowner’s insurance was too high. Apparently, there is a general rule that states the deductible cannot be greater than the 1% of the value of the home (or the amount of the loan) because there is a fear that the homeowner won’t be able to afford a higher deductible. This is especially mind boggling when you consider they lent me over $200,000 and they don’t expect I’d be able to cover a deductible greater than $2,000?

The biggest rub is that, outside the state of Texas, my (and I suspect many others) insurer only had deductibles of $1,000 and $2,500 (no intermediates) so I was forced to drop down to $1k. At least in Texas, you can get a deductible that is 1% of the loan (according to the representative I spoke with on the phone). The actual difference in my insurance premium was a mere $50 a year so it wasn’t a significant pain – but a symbolic one.

I toyed briefly with the thought of raising my coverage amount so I could keep a higher deductible (subtraction by addition, so to speak) but the CSR easily convinced me that was a bad idea. If I raised my coverage, I was paying for insurance I could never claim. So even if the premium increase (of a higher coverage amount) were smaller than the increase (because of a lower deductible), the extra money I paid would never “help me.” At least with a lower deductible, it could potentially save me $1,500 (difference in deductibles) in the event of a $2,500+ problem.

It still strikes me as absurd that they would extend a loan of $200,000+ to someone they are fearful can’t cover a $2,500 deductible – but I suppose their actuaries crunch the numbers and told them to play their cards that way. I’m going to go find an old TV and steal it from myself.

{ 1 comments, please add your thoughts now! }

Related Posts

RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

One Response to “1% Deductible Rule for Home Insurance”

  1. Paul Mulcahy says:

    I recently tried to upgrade my insurance coverage with Allstate when I was told about this one. I tried to go from A+ to A level house insurance, but was told a whole new policy would have to be drawn up and my deductible would be raised to that 1%, which would mean $1027 for me. As a 100% disabled veteran, I wouldn’t even have enough money to use my homeowners insurance if it were $1027. Since right now I’m grandfathered in at a $500 deductible, I’m stuck with Allstate now, even though I’d like to switch due to that and other little shenanigans over time they’ve pulled.

Please Leave a Reply
Bargaineering Comment Policy

Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2016 by All rights reserved.