Alabama home insurance: What are premium, deductible, and limit?

There are a lot of home insurance words that are important to know about. But all the vocabulary words and buzzwords can get overwhelming – it can almost feel like you’re speaking a different language. When Alabama home insurance gets to be a little too much, it can be helpful to decode different topics and how they work. That’s why we’re going to break down three home insurance words (well, kind of numbers – we’ll explain): premium, deductible, and limit.

What is a home insurance premium?

Your home insurance premium is, to put it simply, how much you pay for home insurance. It’s the rate that your insurance company charges you to cover your home. (And, as such, it’s probably one of the things you’re most concerned with when you consider homeowners insurance.)


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Now, you’re probably wondering why your home insurance costs what it does. It might feel like the insurance company just picks a number out of thin air, but that’s not quite the case. There are many different factors that play a part in your home insurance rates, which is why it’s important to get multiple home insurance quotes. The following details about your house can make a difference when it comes to your premium:

  • Your location
  • What your home is made out of
  • How close you are to the fire department
  • Your credit score
  • How much it would cost to rebuild your home from the ground up
  • Your claims history
  • How long you’ve been with your insurance company
  • Whether you qualify for any home insurance discounts – ex. Bundling, having a home security system, and so on

What is a home insurance deductible?

Your deductible is the amount of money that you’ve agreed to pay towards a claim if you have a loss. You have your chunk of the claim and the insurance company has their part (which is probably going to be much larger than yours.) For example, let’s say that your deductible is $1,000. A tree falls on your house and causes $5,000 worth of damage. Your home insurance would pay $4,000 and you would pay $1,000. So, yes, you’re out $1,000, but that’s better than being out $5,000, right? That’s what your home insurance is for – to help you out when the unexpected happens.

Your deductible can play a part in your insurance rates. If you select a higher deductible, you could see lower home insurance premiums. That’s because you’re less likely to file a claim. If you’re able to raise your deductible, you might see lower insurance rates. However, keep in mind that you don’t want to set your deductible so high that you would be hard-pressed if you ever had to pay it. You have to consider how much you could comfortably afford to pay as a deductible if you ever have a home insurance claim.

What is a home insurance limit?

Your home insurance is basically how much home insurance you’ve bought. It’s the maximum amount that your insurance company would pay out for a covered loss.

When you’re considering your home insurance limit, keep in mind that your home insurance should ideally be able to do the following:

  • Rebuild your home from the ground up if it were destroyed by a fire.
  • Replace your belongings
  • Cover your liability

It’s important to make sure that you have enough home insurance to fully protect yourself financially in case of a loss. If you had a fire, your home could be completely destroyed – and that means everything in it. So, you would need enough home insurance to completely rebuild your home (meaning you would have to insure it for its replacement cost) and replace all of your belongings.

(It’s also a good idea to take a home inventory so that you know how much insurance you’ll need for your belongings. It will also help you if you ever need to file a claim because you’ll know exactly what was lost.)

So, there are three home insurance words that are helpful to know. It’s important to make sure you give due consideration to each of these numbers when you get home insurance – your premium, deductible, and limit of coverage all make a difference.


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If you’re looking for Alabama home insurance quotes, we can help. Our team of insurance experts can help you get multiple quotes for home insurance. (And we also like to make insurance easy.) You can get started with your quotes by filling out our online quote form. If you prefer to talk on the phone, no problem – just give us a call and our team will be happy to help.

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