Your home insurance deductible may be higher than you think. Here’s why

With insurance costs on the rise, more companies are promoting a specific type of policy to keep premiums down – but they can come with a big surprise.

One Hazel Crest woman found out the hard way when she overlooked the fine print in her policy. There is a crucial detail every homeowner needs to check before buying a homeowner’s policy.

“Once I actually stepped foot in here, I was in love,” said Nikkia, a first time homeowner in Hazel Crest.

But just a few months into owning her first home, Nikkia woke up in a nightmare. During a cold snap, her pipes burst.

“I came downstairs, and I saw the water pouring from the ceiling,” Nikkia said.

The burst pipe turned into paperwork.

Nikkia had an insurance policy through Liberty Mutual – but as soon as she filed her claim: bad news.

“That’s where [my insurance company] told me I had the $14,000 deductible,” Nikkia said.

It was right there in her policy. The deductible is 2% of her total dwelling coverage, but it was news to Nikkia.

“It’s not particularly new, but it’s something that’s been happening increasingly,” said Bob Passmore with the American Property Casualty Insurance Association.

Passmore explained more insurance companies are offering percentage-based deductibles, calculated from the cost to rebuild your home.

“These deductibles allow homeowners to take on a little bit larger share of the risk in exchange for a lower premium,” he said.

Passmore says these percentage-based deductibles have grown more popular as insurance costs increase. Industry insiders say insurers, operating at a loss in recent years, use them to keep premiums more manageable for customers.

Nikkia admits, as a first-time homeowner, she had no idea what she had signed up for.

“When I was getting my policy. It was just, like, okay, you want the least expensive,” said Nikkia.

Faced with a $14,000 deductible, she decided to pay out of pocket for her repairs and cancel her claim.

“The cost of the repairs were like $6,000, $7,000. And it didn’t make sense,” said Nikkia.

And after that? She updated her homeowner’s policy.

“I changed my policy to reflect $1,000 deductible, which it wasn’t a big difference in the pricing. So it was just like maybe about $30 or $40 more per month, and we could have led with that,” said Nikkia.

NBC Chicago reached out to Liberty Mutual, which said it was reaching out to Nikkia directly to address her concerns.

Here are some key takeaways:

Read your homeowner’s insurance policy. It may be long and dense, but you should at least know what you would be on the hook for if you need to file a claim.

Pay attention to any renewal notices you get through mail or email. Again – you don’t want to be surprised with unexpected costs or changes you didn’t know were coming.