How does a home insurance deductible work?

If you're new to home insurance, you may be curious about deductibles and premiums. What is it? How do they work? And how do they work together? We'll cover some common questions so you can get a better understanding of how home insurance deductibles work in Canada.

What is a home insurance deductible?

A home insurance deductible is the amount you agree to pay first when settling an insurance claim. This allows the risk of insuring your home to be shared between you and your insurer. However, it's important to consider whether submitting a claim makes sense, especially if the cost of your deductible exceeds the cost of your home's repairs. Although your coverage and deductible can generally be tailored to your specific needs to cover both large and small losses, you should consider choosing a deductible amount that's realistic for you to afford in case you need to submit a claim.

How does a home insurance deductible work?

Let's say you experience water damage caused by a burst pipe somewhere in your home. After confirming your claim is eligible, you get the damage assessed and are told you have $5,000 in damages. Knowing you have a $1,000 deductible, let's consider two options you can choose from:
  1. You can opt for a cash settlement where you receive a payment (less $1,000 for your deductible) to hire a contractor of your choice to do the repairs.
  2. You can use one of your insurer's preferred contractors (if available) to do the repairs on your home. You'll be responsible for paying your $1,000 deductible towards the contractor while your insurer covers the remaining balance. Note: If you're a TD Insurance customer, we offer a 3-year guarantee on the covered loss-related repair if you go through one of our preferred contractors (conditions apply).

But what if the cost of your repairs is less than your deductible? In these instances, you'd have to pay for your repairs out of pocket since it wouldn’t make sense to file a claim. Remember to always consider your deductible amount and the cost of repairs before proceeding with a claim. You may be losing out on potential claims-free savings over future renewals if you choose to proceed with smaller claims.

What is the relationship between my deductible and my premium?

Deductibles and premiums go hand in hand. If you choose a higher deductible, you'll typically have a lower premium. And if you choose a lower deductible, you'll typically have a higher premium. If you're unsure what your premium is, it's simply the cost of your home insurance policy and what you pay to your insurer to keep your policy active. The amount you pay for your premium is decided by your insurer and is based on multiple factors like where you live, the age of your home, the deductible and coverage you've chosen, among other things.

How do I choose the right deductible amount for me?

Your insurer should be able to suggest a minimum and maximum deductible amount for you to choose from. From there, you'll need to assess your risk tolerance. If you choose a lower deductible amount, you'll pay less up-front costs during a claims settlement, but will typically have to pay a slightly higher premium. If you choose to pay a higher deductible, you'll have to pay more up front during a claims settlement, but you'll pay slightly lower premiums. It's important that you choose a deductible amount that you're comfortable with. If you do have to go through the claims process, you'll want to ensure you can afford to pay out the deductible. Take a look at your affordability and choose a deductible amount accordingly.

AT TD Insurance, we want to ensure you have the right home insurance policy that suits all your needs, without compromising your budget. If you're an existing TD Insurance customer, you can modify or review your policy from MyInsurance. Or, if you're on the hunt for a new home insurance policy, you can get started with a quote to see what a customized policy could look like for you.

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The content on this page is for general information purposes only and does not constitute legal advice. Coverages described herein may be subject to additional eligibility criteria, limitations and exclusions. In the event you make a claim, potential indemnification is also subject to the receivability of the claim and the type of coverage you bought.

In the case of conflict between the content on this page and your policy wordings, your policy wordings shall take precedence. Please speak to an Advisor or consult your policy wordings for further details.