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Section 1: Introduction
For most homeowners, their homes are the most valuable asset they own. This is why it’s crucial to have the right insurance policy in place to protect your investment. Home insurance offers financial protection against damage or loss of property due to an unexpected event like theft, fire, or natural disasters. But before you file a claim, you need to understand how home insurance excess works.
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Section 2: What is home insurance excess?
Home insurance excess is the amount you agree to pay out of pocket towards any claim you make before your insurance provider pays the rest. It’s also known as a deductible. The excess is usually a fixed amount agreed upon when you take out the policy. You can select the amount based on what you can afford and the level of risk associated with your home. A higher excess will lower your premium, but you will pay more out of pocket if you need to make a claim.
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Section 3: Why do you pay home insurance excess?
The purpose of the home insurance excess is to share the risk between you and your insurer. By agreeing to pay a certain amount towards any claim, you’re reducing the insurer’s exposure to risk. If you didn’t have to pay an excess, you could make small claims for every minor incident, and the insurer would be responsible for covering the cost. This would result in higher premiums for everyone.
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Section 4: How does home insurance excess work?
Let’s say you have a home insurance policy with a $500 excess. If you make a claim for $5,000, you’ll be responsible for paying the first $500, and the insurer will cover the remaining $4,500. If you make a claim for $400, you’ll be responsible for covering the entire cost since it’s less than your excess. Note that some policies may have different types of excess, such as a compulsory excess or a voluntary excess.
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Section 5: How do you choose the right home insurance excess?
Choosing the right home insurance excess depends on several factors, including your financial situation and risk appetite. If you can afford to pay a higher excess, it can help lower your premium and save you money in the long run. However, if you don’t have much savings, it’s best to opt for a lower excess so that you don’t get caught out with a hefty bill in case of a claim. You should also consider the level of risk associated with your property. If you live in an area prone to natural disasters or have valuable possessions, it may be worth paying a higher excess to protect your investment.
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Section 6: When do you pay the home insurance excess?
You’ll need to pay the excess when you make a claim. Your insurer will deduct the excess amount from the total payout they make towards your claim. For example, if your claim is $2,000, and your excess is $500, your insurer will pay you $1,500.
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Section 7: Can you avoid paying home insurance excess?
In most cases, you cannot avoid paying the home insurance excess. It’s a standard part of the policy, and your insurer will expect you to pay it if you make a claim. However, there are some exceptions. For instance, if you’re not at fault for the damage or loss, and your insurer can recover the cost from a third party, you may not need to pay the excess.
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Conclusion
Home insurance excess is an essential part of your insurance policy that helps share the risk between you and your insurer. By understanding how it works, you can choose the right excess level that suits your financial situation and level of risk. Remember, paying a higher excess may lower your premium, but you should only do so if you’re comfortable with the potential out-of-pocket expense in case of a claim.
