Article: Coverage Limits and Deductibles
A Wise Person Knows Their Limits

A Dollar Limit on Replacing the Structure

If your home had to be reconstructed from the ground up, a dollar amount in your policy would set the maximum amount you could receive for rebuilding — not the full market value of your home and land. The square footage of your house can be used to estimate this limit. Work with an insurance agent to help set this accurately, as every home is unique, and you may have made upgrades that should be taken into account.

If special circumstances would increase the cost of replacing your home, you should talk to your agent about purchasing a higher level of coverage. For example, a home that is considered Historic may require more expensive materials or craftsmanship. Also, if an event damages many homes in your area, building supplies may be in short supply and cause costs to increase. You can purchase insurance that extends your structure limit up to 120% of the standard limit.

How Much You Pay To Repair Damage

The deductible is the set amount you will pay out of your own pocket to repair or replace something if you file a covered claim.

The amount you choose for your deductible depends on how much you are prepared to pay if you suddenly needed to make a repair to your home. Some people want to be able to make a claim anytime a repair is needed, so they choose a lower deductible. Others feel that their budget can handle the occasional repair, so they choose a higher deductible.

The deductible level you choose ($250, $500, $1,000, etc.) is one of the factors that determines the amount of your annual premium. Typically, you'll pay less for your policy if you select a higher deductible.