In this episode, we went over homeowners insurance deductibles and a quick tip on how to get lower premiums. For single-family residential homes in the range from $200,000 to $400,000 or so, premiums are going to range from about $600 to maybe $1,200 annually. So, about $50-$100 a month. We've had some people asking how they can get the lowest premium possible. For many people, the difference between $50 and $100 can be a big deal.
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The key to getting a lower insurance premium is to be okay with having a higher deductible. We've recently seen some really low premiums from increased deductibles. In one case by a deductible going from $1,000 to $5,000 the premiums dropped from around $800 down to $350.
This can be a good strategy for people who aren't particularly claim happy. And the more you make claims the more your premiums go up. So, if you're not making many claims having a high deductible might not negatively impact you that much. It's basically there in case of a catastrophe.
Now, we're not insurance experts, so a disclaimer here, but this is a topic that has come up for us a couple of times in the past weeks and we wanted to make sure you knew.
If you have any questions about this or if you have any questions you'd like us to answer on our podcast, you can submit your questions using our contact form or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We'll personally work with you and help you through the whole process.
Frequently Asked Questions
How much does homeowners insurance typically cost for a single-family home?
How can I lower my homeowners insurance premium?
Is choosing a higher deductible a good idea for everyone?
Be sure to ask us for a free quote on your next mortgage. We'll personally work with you and help you through the whole process.
Mortgage Brothers LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Mortgage Brothers NMLS 1007154, NMLS #210917 and 1618695. Equal Housing Opportunity.
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Transcript of the Mortgage Brothers Podcast
Homeowners Insurance Deductibles: What You Need to Know 🏠💰
(00:05) Welcome to the Mortgage Brothers Podcast! I'm Eddie Knoell, and I'm Tom Knoell.
Today, we're tackling a topic that affects every homeowner:
- Homeowners insurance deductibles – how they impact your mortgage, monthly payments, and what you need to know to make the best financial decision.
Let's dive in!
What Is a Homeowners Insurance Deductible?
(00:33) Some people are very particular about their homeowners insurance, while others just go with whatever their agent suggests. But when you're budgeting for a mortgage, understanding your deductible is key.
- A deductible is the amount you must pay out of pocket before your insurance kicks in to cover a claim.
For example:
- If you have a $1,000 deductible and a storm damages your roof, you'll pay $1,000 before the insurance covers the rest.
- If you have a $5,000 deductible, you'll pay more upfront in the event of a claim, but your monthly premium will be lower.
How Much Does Homeowners Insurance Cost?
(01:01) Premiums vary depending on:
- The value of your home
- Your deductible amount
- The type of coverage you choose
- On average, homeowners insurance costs: $600–$1,200 per year (or about $50–$100 per month).
(02:04) But what if you need to lower your monthly expenses?
We recently had a case where a borrower needed just $20 less per month to qualify for their loan. A simple way to do that? Increase the homeowners insurance deductible to lower the monthly payment!
How to Lower Your Homeowners Insurance Premium
(03:12) If you're looking to reduce costs, the best way is to raise your deductible.
- Standard deductible: $500–$1,000
- Higher deductible: Up to $5,000
If you increase your deductible from $1,000 to $5,000, you could cut your insurance premium in half!
Example:
- A homeowner paying $800 per year could reduce it to $350–$400 per year with a higher deductible.
- That's $30–$40 saved per month—which could help you qualify for a mortgage with a lower debt-to-income ratio.
What Do Lenders Require?
(04:20) Your mortgage lender will have minimum deductible requirements to ensure you can still afford to cover a claim.
- Most lenders require:
- A deductible of $5,000 or less
- OR 5% of the home's value, whichever is lower
Should You Choose a High or Low Deductible?
(07:05) Consider a higher deductible if:
- You have enough savings to cover a larger deductible in case of a claim
- You don't plan on filing frequent claims
- You want to save on your monthly mortgage costs
Stick with a lower deductible if:
- You prefer more coverage with less out-of-pocket expense in case of damage
- You anticipate needing to file a claim in the near future
(08:55) Remember: Insurance companies track your claims history. Just like car insurance, too many claims can increase your rates.
Final Thoughts
(09:09) Homeowners insurance is a key part of your mortgage payment. If you're looking to save money or improve your loan approval chances, adjusting your deductible could be an easy way to do it.
Pro Tip: Talk to your insurance agent about different deductible options to find the best balance between savings and coverage.
- Have questions? Drop them in the comments or email us!
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