Haris Ashley
AAA offers homeowners insurance that covers damage to your home and belongings in the event of a fire, lightning, smoke, theft, vandalism, water damage, wind damage, and more. It also protects you financially if someone is injured on your property and sues you to pay their medical expenses. When purchasing homeowners insurance, it's important to understand the difference between a premium and a deductible. The premium is the amount you pay for your insurance policy, and the deductible is the amount you pay out of pocket before your insurance company covers the remaining costs of a claim. For example, if you have a $500 deductible and your home is damaged by lightning, resulting in $2,500 worth of covered damage, you would pay the $500 deductible, and your insurer would cover the remaining $2,000.
| Characteristics | Values |
|---|---|
| What is a deductible? | The amount you pay out of your own pocket before your insurance company covers the rest |
| How does it work? | You choose a deductible amount when you purchase a homeowners policy. If an insured event occurs, you pay the deductible amount first, and the insurer covers the remaining costs. |
| Deductible amount range | Homeowners insurance deductibles typically range from $500 to $5,000. |
| Choosing a higher deductible | Selecting a higher deductible will lower your premium payments, but you'll pay more when making a claim. |
| Deductible as a percentage | Sometimes, the deductible is a percentage (e.g., 2%) of the insured property's value instead of a fixed amount. |
| AAA Home Insurance deductible reduction | AAA offers a benefit that reduces the deductible by $50 every term you are claim-free, up to a maximum reduction of $500. |
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What You'll Learn
AAA homeowners insurance deductible vs. premium
Homeowners insurance is not required by law, but your mortgage lender might require you to have it. AAA Home Insurance protects your home, personal property, liability, and more. When you buy an insurance policy, you pay an amount called a premium. Depending on the policy, you might pay your premium monthly, semi-annually, or annually. In return, your insurer promises to pay for any losses you suffer that are detailed in your policy. For example, if you have an accident in your car, your insurer will pay for repairs since you've paid your auto premiums. Your premium is calculated based on your risk. Insurers employ underwriters who delve into your unique situation—your age, where you live, and your driving record—to predict the likelihood that you'll suffer a loss.
Your state and even your ZIP code can influence the amount you pay in home insurance premiums. For instance, if you live in an area that has high crime rates, you may have higher premiums. Areas that are more prone to natural disasters, such as hurricanes or tornadoes, will also see higher premiums. On the other hand, if you have a home security system, you can decrease your risk, and your insurance company may lower your premiums. Similarly, proximity to a fire station or fire hydrant is another factor that may result in lower premiums.
A deductible is the amount you will pay out of pocket for a covered claim. Choosing a higher deductible will lower your premium payments, but you'll pay more when submitting a claim. Essentially, your premium gets you covered, and your deductible comes into play when you need to submit a claim. For example, if you prefer to avoid risk, a lower deductible is preferable to avoid unexpected additional expenses. On the other hand, if you'd rather pay less upfront, a higher deductible policy may be a better option.
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What does AAA homeowners insurance cover?
Homeowners insurance is not required by law, but your mortgage lender might require you to have it. AAA homeowners insurance protects your home and belongings against damage, theft, and claims from lawsuits for injuries that occurred on your property. You can customize your homeowner's insurance policy to maximize your savings. For instance, AAA's Ultimate Plan offers a claim forgiveness opportunity and a chance to earn cash back or a renewal credit for remaining claim-free every policy term. You can also get a reduction on your deductible of $50 every term you are claim-free, up to a maximum reduction of $500. Additionally, you're covered for loss or damage to exterior underground service lines (e.g. water, sewer, or power), and for breakdowns of essential household systems like central air conditioning, furnaces, or water heaters.
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How much does AAA homeowners insurance cost?
The cost of AAA homeowners insurance depends on a variety of factors, including location, condition, value, and claims history of the home. According to NerdWallet, the average cost of home insurance in the US is around $1,915 per year, although Zillow estimates a lower average of $1,200 per year, or about $35 per month for every $100,000 of a home's value.
In California, for example, the average cost of homeowners insurance is approximately $1,250 per year, which is about 35% lower than the national average. The cost of insurance in California can be influenced by factors such as the age, construction, and condition of the home, the replacement cost, the presence of a swimming pool, and whether a home-based business is operated on the premises.
While homeowners insurance is not legally required, it may be mandated by your mortgage lender. In such cases, the lender will typically request proof of insurance when closing on the home and expect continuous coverage throughout the life of the loan. To obtain a specific quote for AAA homeowners insurance, it is recommended to contact an experienced AAA insurance agent, who can help customize a policy based on your unique circumstances.
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Is AAA homeowners insurance mandatory?
AAA offers homeowners insurance, which is not mandatory by law. However, it is usually required by mortgage lenders. When you take out a mortgage, your lender will typically ask for proof of homeowners insurance and will expect you to maintain it for the duration of your loan. This insurance protects your home and belongings from damage, theft, and claims from lawsuits for injuries that occur on your property. It also includes hazard insurance, which covers the cost of rebuilding your home in the event of damage from fires, hailstorms, lightning, smoke, vandalism, or frozen pipes.
The cost of homeowners insurance varies depending on your situation, but on average, it is around $1,200 per year in the US, or about $35 per month for every $100,000 of your home's value. If you use an escrow account, you can pay your mortgage, insurance, and property taxes in one monthly payment. This is often required if your down payment is less than 20%.
To get a better understanding of the insurance coverage you need, you can talk to a AAA Insurance Agent. They can help you customize your policy and maximize your savings.
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How does AAA homeowners insurance work with mortgage lenders?
Although the law does not require homeowners to purchase insurance, your mortgage lender might. When closing on a home, your lender will likely request proof of homeowners insurance and expect you to maintain coverage for the duration of your loan. This is to ensure their financial interests are protected in the event of damage or theft.
AAA offers homeowners insurance provided by CSAA Insurance Group, and their agents can help you customize your policy and maximize your savings. The cost of your insurance will depend on your unique situation, but on average, homeowners insurance costs about $1,200 per year, or roughly $35 per month for every $100,000 of your home's value.
Your mortgage lender may set up an escrow account, managed by a third party, through which you'll make a single monthly payment that covers your mortgage, insurance, and property taxes. Escrow accounts are common and may be required if your down payment is less than 20%. If you don't use an escrow account, you'll need to pay your mortgage, taxes, and insurance separately to different entities.
It's important to understand your insurance policy and ensure you have adequate coverage. AAA insurance agents can explain the details of each policy and help you find the right coverage for your needs.
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Frequently asked questions
A deductible is the amount you pay out of your pocket before your insurance company covers the remaining cost of damage. For example, if you have a homeowners policy with a $500 deductible and lightning strikes your house, causing $2500 worth of covered damage, you would pay $500 and your insurer would cover the remaining $2000.
Homeowners insurance deductibles generally range from $500 to $5000.
Choosing a higher deductible will lower your premium payments.
Homeowners insurance covers damage to your home and belongings in the event of a fire, lightning, smoke, theft, vandalism, water, wind, and more. It also includes liability coverage for injuries that occur on your property and lawsuits.
The cost of AAA Homeowners Insurance varies based on location and coverage needs. In California, the average rate is around $1250 per year, while the national average is around $1200 per year.
