Homeowners insurance deductible: What it is and how to pick one

Your homeowners insurance deductible is the out-of-pocket amount you’re responsible for paying before your insurance kicks in. If you raise your deductible, it will lower your insurance premiums.

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A homeowners insurance deductible is the out-of-pocket amount that you’re responsible for paying before your insurer will pay out on a claim. After you pay your deductible, the claim payment you get from your insurance company is the damage or loss amount minus your deductible. That means if a fire causes $50,000 in damage to your house and you have a $1,000 policy deductible, your insurance company should pay you $49,000 ($1,000 subtracted from $50,000) for repairs.

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 ( your monthly or annual insurance payment) is directly correlated with how high or low you set your deductible. If you have a lower deductible, you’ll pay less out of pocket for a claim, but you’ll pay more in policy premiums. Opting for a higher deductible will lower your home insurance rates, but it could also prove unaffordable if you ever have to file a claim.

Key Takeaways

  • Your policy deductible is one of the most important parts of your homeowners insurance policy — the amount you set it to could impact your policy premiums and finances

  • A higher deductible typically means lower insurance rates, while a lower deductible means higher insurance rates

  • Depending on where you live, your policy may include two types of deductibles: a flat dollar amount (typically $500 to $2,000) and a percentage amount (typically 1% to 5%) 

  • To choose the right deductible amount, you’ll have to weigh what you’re able to afford in policy premiums versus what you’ll be able to afford to pay on a claim

  • If you’re in a comfortable position financially and don’t mind covering small house repairs or losses out of your own pocket, it may be worth considering a high deductible policy

How do homeowners insurance deductibles work?

A homeowners insurance deductible is the fixed dollar amount that you’re responsible for paying before your insurance will pay out for a claim. The claim check you get from your insurance company is the insured damage or loss amount minus your deductible.

You pay your deductible 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 to this is in the state of Florida, where you pay a special hurricane deductible on a per season basis rather than for each individual storm. 

When do you pay the deductible for homeowners insurance?

Your deductible is paid once your claim is accepted and you’ve agreed to a claim settlement with your insurance company. You don’t pay your deductible like you would your phone or utility bills — rather, your insurer simply subtracts it from the claim amount. If your claim is for $10,000 and you have a $500 deductible, you’ll receive a $9,500 claim check from your insurer.

Types of homeowners insurance deductibles

There are two types of homeowners insurance deductibles: flat dollar amounts (for most causes of property damage or loss) and percentage deductibles (for damage from wind/hail, named storms, or hurricanes). In both cases, it’s the amount taken off the top of a claim payment; after your deductible is paid, the insurance company will cover the remainder of the claim.

Flat dollar amount deductibles

This is the standard, fixed-dollar amount deductible that you pay out of pocket when you file a claim for a covered loss. A standard homeowners insurance policy deductible is usually in the range of $500 to $2,000, although lower and higher deductible home insurance plans are also common.

Percentage deductibles

Percentage deductibles are specific to wind/hail, named storm, and hurricane-related claims and are calculated based on the percentage (usually 1% to 5%) of your home’s insured value, or the dwelling coverage limit in your policy. 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. 

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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.

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.

Wind/hail deductibles

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.

How to choose your homeowners insurance deductible

When choosing your homeowners insurance deductible, you’ll have to weigh lower home insurance rates in the short term versus higher out-of-pocket costs in the long term, should a disaster strike. If you raise your deductible, you’ll likely cut insurance costs and therefore have less to pay upfront, but you’ll be left having to pay more on claims if your home is ever badly damaged or burglarized.

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."

Davis also noted that deductibles can be a very important issue in some areas, particularly 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."

What is the standard homeowners insurance deductible?

There isn’t a standard home insurance policy deductible, but most home and renters insurers offer a minimum deductible of $500 and $1,000, according to the Insurance Information Institute. [1] Most major insurers offer deductibles as high as $2,500 and $5,000, with a few who offer even higher deductible plans or optional percentage deductibles as a mechanism for lowering your rates. 

Frequently asked questions

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.

Is $2,500 a good home insurance deductible?

As long as you’re comfortably able to pay it in the event of a claim and don’t mind paying out of pocket for smaller losses (say, a broken pipe or stolen laptop), $2,500 is a fine deductible to choose. If you don’t have much in the way of savings or live in an area at risk of property damage or theft, you may want to consider a lower deductible.

Do you have to pay a deductible for the liability portion of your policy?

Unlike your property coverages, you typically don’t pay a deductible on liability claims.

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