Ideal deductible on Home Insurance


#1

Hi Guys,

Need some advice on what you guys think is the ideal deductible on home insurance - both primary and rentals. This is more a poll question than request for advice on choosing deductible according to personal situation :slight_smile:

I want to know what the smart investors and home owners on this forum have chosen as their deductibles on primary and rental policies! Assume decent cash reserves, bay area level incomes, homes etc etc

Many thanks for your feedback.


What protection does LLC provide a landlord?
#2

Another question - In your opinion, is the sump and sewer backup protection worth it?


#3

Presumably everyone compared the cost of the coverage at the levels they are comfortable with and chose the one that seems to be in that sweet spot - not too low so that the coverage is a tad too expensive but not too high either to be somewhat of a burden should there be an actual claim.

I believe I am at 1K deductible on everything…


#4

Thanks for sharing :slight_smile:

So you would file a claim above $1k. Or is the reasoning that you may file a claim only if it’s above 1.5k but at that time you want more money back hence 1k coverage.

Not questioning your decision, just trying to understand what’s the prudent way to chose deductible and make claims. And you guys are obviously smarter than me so asking here :wink:


#5

Right, somewhat along that line of thinking. Cuz we know at the end of the day if you file a claim you are just asking for a rate hike next year. Now that you brought it up, perhaps I should raise my deductibles or at least look into it again to see how the premium changes. If I remember correctly, times that I did check it almost didn’t make sense to raise it since the savings in premium was fairly minor.


#6

I view insurance is protection against catastrophic loss not minor events. If I remember right, it’s $1k. I actually wanted higher, but it wasn’t allowed with the umbrella policy. The umbrella requires specific minimum coverage and deductions on home and auto policies. That’s part of why the umbrella is so cheap. The better your base coverage the less likely it is you’ll need it.


#7

Thanks for sharing. I would guess $1k is the min anyone of this forum would have considering folks here are quite savvy. I am trying to figure out if 1.5k or 2.5k makes sense. Esp if general consensus is not to make a claim below those amounts.

Umbrella requiring 1k min deductible is interesting esp since by the very definition, umbrella doesn’t care what happens on the lower policies and won’t pay out until max cap of lower policy is reached.


#8

For Austin properties, $2.5k deductible. I don’t recall any requirements on deductible. Umbrella requirements concerned coverage only.


#9

Thanks for sharing.

Off-topic ques on Austin rentals - what’s the ideal “in-demand” rental house in that market in terms of size, school, year built etc for best ROI?

I was thinking in following terms, given the ideal tenant profile to be stable white-collar college educated salary earner couple with or without kids:

  1. Size: Given property prices and rent/buy calculations, most families with decent stable income must be buying by the time they have school going kids. So does that mean, there’s more demand of 2-3 bed ~1500sq ft SFH as rentals vs say 4+bed 2000+sq ft rentals?

  2. Schools: Does demographic of majority of tenants mean schools are not a factor in choosing rentals?

  3. Location: Does demographic of majority of tenants mean less commute to work is a major factor in choosing rentals?

  4. Amenities: Are tenants willing to pay more rent for gated communities or amenities like swimming pool, etc in the community?

Without knowing anything about that market, I would guess majority of tenants with my ideal tenant profile described above would be in their 20s, married, with young kids and be happy with 3 bed SFH 1500-2000 sq ft that may not have good schools but is closer to work. How off am I in my armchair assumptions?


#10

Single family house,
3 bedrooms + bonus room (for game, home office) or 4 bedrooms, Austinites use to big house :slight_smile:
7-10 years in age, since we’re in 2017, should be built in 2007-2010, to minimize maintenance,
$250k-$350k, too cheap-bad tenants, too expensive hard to get tenants,
Walking distance to schools (ideally less than 0.7 miles to elementary school), rent out fast,
1600-2000 for single story, 2300-3500 for double story, Austinites use to big house :slight_smile:
In general, no need to include fridge/ washer/ dryer,
Near amenities is almost a must so master-planned communities with HOA is better.

All my rentals are in NW Austin/ Pflugerville as I am targeting techies and those working in The Domain/ Gateway/ Arboretum. If targeting UT/Musicians/startup technies, then should be in South and SW Austin.

Ratio of property tax vs property management vs maintenance = 9:2:1


#11

Thanks a ton for sharing. That’s a pretty good Austin LL 101 :smiley:


#12

We have the deductible $500 for out of state SFR, $1000 for California SFR and $2500 to $5k for larger properties. It’s basically some % of the building value.

150k house… $500
500k house… $1000
1000k house $2500

0.2% of structure value?


#13

On the insurance companies I used and am using now, max deductible is $1k to $1.5k. I go with the max. If I had a choice, I’d probably go up to $2.5k.

I made a claim once. After the claim, the premium was increased by several hundred for 3 or 4 years. And if you make 2 claims in 5 years, they can cancel your coverage; and this is allowed by law. So having low deductible doesn’t make sense. It’s not like you can make money (or save money). And realistically, you cannot make claims for $500-1k loss every time something happens


#14

Peter, thanks for sharing. Your approach of choosing deductible as % of property value is interesting. I am assuming you must be using a % of replacement cost and not market value?
In your example, even though you chose $500 deductible for $150k (replacement cost?) house, would you actually make a claim for say $900 repair?


#15

Thanks for sharing! This is exactly what I have been pondering and hence thinking I should probably raise my deductible from existing 1k to either 1.5k or 2.5k.


#16

The 500 limit likely is dictated by a lender.
And, no claim for less than 10k so far.

I had 2 claims in 20 years… 20k and 10k


#17

Everyone is searching for a way of cutting costs, a method to lower their overall monetary expenses. Saving on home insurance is a reasonable, viable option when choosing to take control of your finances. Consider raising your deductible. The higher the deductible, the lower the premium. If you have been associated with the same company for a long time, you are probably entitled to a price deduction. Some companies will cut their premium by up to 5 percent if you have been with them for at least three years. Get more information regarding this over here. Home insurance typically includes both buildings and contents insurance, so take that into consideration while looking for one.


#18

I recommend $5 or 10k…Any claim will raise your rates…Dont make claims, fix your own problems…Major calamities should be your only concern…

Quote
I made a claim once. After the claim, the premium was increased by several hundred for 3 or 4 years. And if you make 2 claims in 5 years, they can cancel your coverage; and this is allowed by law. So having low deductible doesn’t make sense. It’s not like you can make money (or save money). And realistically, you cannot make claims for $500-1k loss every time something happens

The point is get a home warranty…Those claims don’t raise your rates and can handle a lot of the little issues…Real home insurance claims are often messy and may require an attorney. …Unless straight forward like fire damage. …