Home insurance has been making headlines lately as insurers deal with the aftermath of severe weather events such as storms, wildfires, and flooding. According to the Insurance Bureau of Canada (IBC), the cost of severe weather events reached over $8 billion in 2024, nearly three times the amount from 2023. As a result, home insurance rates are on the rise. If you find yourself paying too much for home insurance, especially if you’ve never made a claim, your deductibles might be the culprit.

What is a deductible?
A deductible is the dollar amount you agree to pay out of pocket in the event of a claim before your insurance company covers the rest. For example, if your deductible is $1,000 and you have a claim for $1,500, you’ll need to pay the first $1,000, and your insurer will cover the remaining $500.

Your deductible amount is decided in advance and should be listed in your policy. Almost all types of insurance have at least one deductible. If you have a home insurance policy, you’ll likely have the option to choose your deductible, as most insurance companies allow their customers to do so. In some cases, an insurance company may set their own deductible, but this is typically for high-risk coverage that wouldn't be offered otherwise. However, you would need to agree to it; it wouldn't be done without your knowledge.

How does my deductible affect my premiums?
Your deductible affects your premiums: choosing a higher deductible will result in lower premiums, while a lower deductible will result in higher premiums. It’s important to understand that by choosing a higher deductible, you agree to take on more risk as you’ll have to pay a larger portion of any claim. This choice also suggests to your insurance company that you’re less likely to make small claims, given you’d be responsible for covering more of the costs yourself. So, if you want to save on your insurance premiums, you could consider increasing your deductible, but keep in mind that if an unexpected event damages your home, you’ll have to pay a larger amount out of pocket for the repairs.

You can lower your risk by keeping your home well-maintained. This proactive approach can help you avoid making a claim altogether. Remember, insurance is meant to be a precaution, not something to lean on regularly – especially for issues you can fix or prevent on your own.

How are deductibles listed in a policy?
Since some insurance policies have multiple deductibles, there are various ways to reduce them. You can lower one deductible without affecting the other. It’s important to note that not all policies list their deductibles as a flat dollar amount. Here are some ways deductibles may be listed in a policy:
 

• Dollar amount: This is the most common method for listing deductibles. Most home insurance deductibles range from $500 to $2,000. For example, if you make a claim for $5,000 and your deductible is $1,000, your insurance company would pay $4,000.
• Percentage: Sometimes, a deductible is listed as a percentage of your total coverage limit. For example, if your coverage limit is $200,000 and your deductible is 3%, you’d have to pay $6,000 when making a claim.
• Both a dollar amount and a percentage: Some policies list both types of deductibles. In this case, the dollar amount would apply to most standard claims, while the percentage would apply to specialized claims, such as those related to earthquakes or flooding.

When changing your deductible, carefully consider how each amount will affect you in the event of an incident. You don’t want to be caught off guard by a deductible you can’t afford.

Types of deductibles
Certain losses may come with their own deductibles, although this isn't the case for all insurance policies. Here are some common losses that often have specific deductibles:
 

• Vandalism and theft: Damage or loss due to vandalism, theft, and other crime-related incidents are typically applied to vacant or vacation properties, which are more susceptible to these incidents because the homeowner is away. This also applies when renting or sharing your property with unfamiliar people.
• Earthquakes: Earthquake coverage is generally available as an add-on since it's a specialized type of damage. The deductible is usually listed as a percentage of your total coverage, so it's essential to do your math before agreeing to a higher deductible.
• Flooding: Similar to earthquake coverage, flood insurance is generally available as an add-on—and only for eligible policyholders. Flood damage can occur too frequently in certain areas to be insurable. Floods can be categorized in two ways:
  • Overland floods occur when water enters your property due to heavy rains, spring runoff, or overflowing lakes or rivers.
  • Sewer backup floods occur when a sewer, septic system, or sump pump overflows, leading to water entering your property.
• Hailstorms: While most standard home insurance policies cover hailstorms, there may be a separate deductible for hail-related damage, especially if it's common in your area.

When reviewing your deductibles, remember that you’ll be responsible for paying them in the event of an incident. If you're unsure about your ability to afford high deductibles, you might want to consider opting for higher premiums instead. Another option is to set aside enough money in advance to cover any unexpected expenses, but not everyone is in a position to do this. In any case, carefully weigh your options and don’t assume that the risks you're insured against will never affect you. The last thing you want is to face a disaster and find yourself without funds to repair the damage, even if you have the right coverage in place.

If you're a current OTIP policyholder, contact us at 1-833-615-9329 to review your existing home insurance policy and discuss additional optional coverage. If you’re not insured with OTIP and are shopping for home insurance, call us at 1-833-494-0085 to get a quote and receive a $20 gift card of your choice!