For young couples brand new to the housing market, let alone the house insurance market, one of the first hurdles is generally the terms that are thrown about. Apparently it has been agreed by all those involved in the marketing and selling of home insurance that everybody understands exactly what they mean even though for many people this is simply not the case. There are two terms in particular that it is very important to understand. This is because they both refer to things that can be modified to get lower premiums but getting lower premiums in this manner can come at a cost.

Increasing Your Deductible

The meaning of this word when it comes to home insurance is pretty easy to understand once it is explained. The amount of your deductible is simply an agreed amount of cash between you and the insurance company that will be deducted from the total reimbursement you receive should you make a claim. For example if you have a thousand pounds deductible and you make a five thousand pound claim, you will only receive four thousand pounds in compensation. Why would you want such a thing? Because the higher the value of the deductible that you agree on with your insurance company, the lower the premiums that they will ask you to pay. However the catch is that you can then no longer claim for any damages that would result in compensation lower than your deductible.

Decreasing Your Replacement Value

When you insure your home, you are required to state how much it would cost to replace it. This is incredibly significant as it is the amount of money that you will be compensated should the worst come to pass. However at the same time, the higher the replacement value that you record, the higher your monthly premiums will be. Many people are tempted to reduce the replacement value on their home insurance policy in order to get lower premiums. Doing so however can undermine greatly the very reason that you purchased home insurance in the first place for. Therefore never reduce your replacement value without serious consideration.

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