What is a home insurance deductible?
A homeowners insurance deductible is the amount you’re responsible for paying out of pocket before your insurance company will pay on a claim. You typically have the option to set your deductible between $500 and $2,500 — sometimes even higher. The claim payment you get from your home insurance company is the damage or loss amount covered by insurance minus your deductible.
You choose your deductible at the time you purchase home insurance, but you can change it at any time during your policy term. The amount you pay in homeowners insurance premiums is directly correlated with how high or low you set your deductible. The higher your deductible, the lower your premiums — and vice versa.
When do you pay your homeowners insurance deductible?
You don’t pay your deductible like you would your phone or utility bills — rather, your insurer simply subtracts it from the claim settlement amount it agrees to pay you after your claim has been accepted.
Let’s take a look at an example.
Say a fire causes $50,000 in damage to your house and you have a $1,000 policy deductible. Your insurance company should reimburse you $49,000 ($1,000 subtracted from $50,000) for repairs.
Deductibles are paid on a per-claim basis, meaning if your home is damaged in two different events that were a month apart, you’ll have to pay two separate deductibles on those respective claims. The only exception is Florida, in which the deductible you must pay for hurricane damage is per hurricane season, instead of per claim or per storm.
What are the different types of homeowners insurance deductibles?
There are two types of homeowners insurance deductibles: flat and percentage deductibles. In both cases, it’s the amount taken off the top of a claim payment paid out by your insurer.
Flat or dollar amount deductibles
This is the standard, fixed-dollar amount deductible that you pay out of pocket when you file a claim for most causes of property damage or loss. A standard flat-dollar deductible is usually in the range of $500 to $2,500, although lower and higher deductible policies are also available.
Percentage deductibles are specific to wind/hail, named storm, and hurricane-related claims. They’re calculated based on the percentage — usually 1% to 10% — of your home’s insured value (i.e. the dwelling coverage limit in your policy). These deductibles typically only apply if you live in an area that’s at high risk for hurricane or wind damage.
If your house is insured for $200,000, for instance, and your policy has a 1% hurricane deductible, $2,000 would be deducted from the claim payment.
What is the average home insurance deductible?
There isn’t an average home insurance deductible, but most homeowners insurance companies offer a minimum deductible of $500 or $1,000, according to the Insurance Information Institute.
Most major insurers offer deductibles as high as $2,500 or $5,000, with a few offering even higher deductible plans or optional percentage deductibles as a mechanism for lowering your rates.
How to choose your homeowners insurance deductible
When choosing your homeowners insurance deductible, you’ll need to take a look at your finances and consider two questions:
Would you rather have lower home insurance rates in the short term and risk higher out-of-pocket expenses if your home is damaged?
Would you rather have more expensive home insurance rates, but less to pay out of pocket when filing a claim?
What does this mean for you?
Basically, if you raise your deductible, you’ll likely cut insurance costs and therefore have less to pay up front. But you’ll be left with a smaller settlement check when you file a claim.
According to William Davis of the Insurance Information Institute, limiting your out-of-pocket expenses is virtually the sole reason for choosing a lower deductible policy. Otherwise, it’s up to the policyholder and their circumstances.
"There really aren't any other benefits other than having to pay less out of pocket in the event of a loss," Davis says.
"But policyholders should discuss their individual situation and insurance needs with their company representative or agent to ensure they understand their coverages, the deductibles that are available, and how those things will affect them in the event of a loss."
How does your deductible affect your homeowners insurance rates?
Raising your deductible can have a significant impact on your homeowners insurance premiums. In general, a higher deductible means cheaper rates, while a lower deductible means higher rates.
Homeowners insurance premiums can vary as much as $1,300 by choosing a $2,000 deductible over a $500 one — according to ASI Progressive rates.
Here's a look at annual rates based on different deductible amounts, according to our analysis of 2022 home insurance rate data from around the country.
What are disaster deductibles?
Deductibles can vary depending on what type of storm caused the damage or loss to your home or personal property. While wind, hail, and hurricane damage are covered by a standard homeowners insurance policy, a special percentage deductible may kick in depending on the details of your policy and what state you live in.
Hurricane and named storm deductibles
In hurricane-prone regions of the country, like Florida and many oceanside counties on the Atlantic coast, special hurricane deductibles may be “triggered” and applied to named storm or hurricane damage claims. In Florida, you pay a hurricane deductible on a per season basis rather than for each individual storm.
The criteria for what can trigger a named storm or hurricane deductible generally varies from state to state, but insurance companies typically need to wait until a storm or hurricane has been officially declared or named by the National Weather Service.
Davis also notes that deductibles can be a very important issue in hurricane-prone places.
"Policyholders need to determine how their state's hurricane deductibles — which are a percentage of the home's value instead of a set dollar amount (they vary by state) — will impact their ability to handle the total amount they would have to pay out of their own pocket in the event of a loss."
Wind and hail deductibles function very similarly to hurricane deductibles in that they’re paid mostly in percentages rather than fixed-dollar amounts. These types of deductibles are the standard in Tornado Alley (Kansas, Oklahoma, Texas, and Nebraska) and certain Midwestern states like Ohio and Illinois.