Homeowners insurance is a handy—critical, even—policy that will cover disasters to your property, such as fire, theft, and storm damage. But that doesn’t mean you won’t dip into your rainy-day fund when those events occur.
When you file a homeowners insurance claim, you typically have to pay part of the repair costs yourself before your insurer pays the rest. That out-of-pocket amount is called your home insurance deductible, and it’s deducted from your claim payment after approval.
By choosing a higher deductible, you can secure lower premiums, since you are agreeing to cover a greater percentage of your own expenses whenever your property is damaged. However, a lower deductible may be better in some cases. The best deductible depends on things like your finances, emergency savings, and risk tolerance.
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What is a home insurance deductible?
Your home insurance deductible is the amount of money you must contribute out of pocket whenever you file certain claims on your homeowners insurance policy. Suppose you experience $3,000 worth of covered property damage but have a $500 deductible. In this case, your insurer would pay out $2,500 toward your claim, and you would be responsible for covering the remaining $500 yourself.
Deductibles save insurers money by preventing excessive claims. Charging a deductible of, say, $1,000 means you won’t file for damage of $1,000 or less. In fact, it may not even be worth it to file a claim for anywhere near $1,000 because filing claims can make your premiums increase.
How does a home insurance deductible work?
Again, you don’t generally pay your deductible directly to your home insurance company each time you file a claim. The deductible amount you choose is instead automatically subtracted from your insurance settlement once your claim is approved. This means you’ll effectively pay your deductible to whoever fixes or replaces your property, and then you’ll use the check from your insurance company to cover the rest of the bill.
Flat dollar vs. percentage deductibles
Depending on your insurance company and policy details, you may encounter two different types of deductibles for home insurance: flat and percentage deductibles.
Flat deductibles
The most common option for a homeowners insurance deductible is known as a flat or fixed deductible. This simply means that your deductible is set at an unchanging dollar amount, and this standard deductible amount consistently applies to all eligible claims—regardless of how much insurance coverage your policy provides.
Percentage deductibles
Alternatively, your policy may include a percentage-based deductible, meaning your out-of-pocket is calculated as a percentage of your home’s insured value. As an example, if you opt for a 2% percentage deductible and have $400,000 worth of dwelling coverage, then your deductible is set at $8,000 per claim.
Depending on the circumstances, both types of homeowners insurance deductibles may be included within the same policy. For example, if you live in a disaster-prone region, you may have a percentage deductible for hurricane or other natural disaster claims, while a standard flat deductible may apply for all other types of property damage claims.
What types of claims require a deductible?
Generally, you’ll have to pay a deductible whenever you file a claim for damage to your home, your belongings, or other freestanding structures on your property. Here are examples of losses that are often covered by dwelling, other structures, and personal property insurance—and which typically require a deductible as a result:
- Fire and lightning
- Wind and hail
- Explosions
- Riots or civil commotion
- Damage from aircraft or vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcano eruptions
- Falling objects
- Weight of ice, sleet, or snow
- Sudden discharge of water or steam from home systems or appliances
- Sudden tearing, cracking, burning, or bulging of home systems or appliances
- Freezing of home systems or appliances
- Damage from artificial electrical currents
How your home insurance deductible affects your premium
Your home insurance deductible and premium generally move in opposite directions. Choosing a higher deductible usually lowers your premium because you’re agreeing to pay more out of pocket if you file a covered claim. Meanwhile, choosing a lower deductible typically raises your premium because your insurer assumes more of the financial risk.
How to choose the right home insurance deductible
Most homeowners opt for an average home insurance deductible of $1,000, but you may want to consider a higher or lower deductible, depending on your situation.
A high deductible may be beneficial if you:
- Have a sizable emergency fund you can use to cover a high deductible
- Have a low exposure to storms, wildfires, or other perils that could lead to frequent, costly claims
- Need to save money on your monthly premiums and are willing to accept more financial risk to do so
- Want a policy that rewards you with long-term cost savings if you avoid filing claims
On the other hand, a low deductible may make more sense for you if:
- It’s easier for you to budget for slightly higher monthly premium payments than for a larger one-time payment in the event of an unexpected claim
- You don’t need a high deductible to save on home insurance because you qualify for other discounts that make your policy affordable
- You are more likely to file several claims because you live in a high-risk area
- You want coverage for smaller claims that wouldn’t be covered if you had a higher deductible
Home insurance deductibles at a glance
- A home insurance deductible is an out-of-pocket contribution you must make toward your own repair bills anytime you file a property damage claim on your homeowners insurance.
- You can’t file a home insurance claim unless the cost of repairs is higher than your deductible. Since filing a claim can make your premiums go up, it’s best not to file a claim unless the cost of repairs is significantly higher than your deductible.
- Your insurance company will automatically subtract your deductible from your payout upon approving your homeowners insurance claim.
- Deductibles for home insurance may be set at a fixed dollar amount or a percentage of your dwelling coverage limit. Percentage-based deductibles commonly apply to hurricane and other windstorm-related claims.
- Home insurance deductibles always apply to claims on your dwelling, other structures, and personal property coverage, but they may not apply to other types of home insurance claims.
- The higher your deductible, the cheaper your homeowners insurance premiums will be.
- High deductibles are best for low-risk homeowners with enough money saved up to pay a large amount out of pocket in case of a claim. Low deductibles are best for high-risk homeowners or those who prefer to pay more on a monthly basis in exchange for more comprehensive protection.
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Common deductible mistakes homeowners make
As you consider the impact of your deductible on your homeowners insurance coverage, be sure to avoid:
- Choosing a deductible you can’t afford in the event of a claim
- Filing claims for losses that barely exceed your deductible
- Selecting the lowest possible deductible—and paying higher rates as a result—even if you can afford a higher deductible
- Going with the highest deductible possible, assuming it’s the only way to save on your monthly insurance premiums
- Failing to file additional living expenses, medical payments, or personal liability insurance claims because you think your deductible applies to those claims
- Forgetting that you may have to pay a higher percentage-based deductible for windstorm claims
The takeaway
Deductibles generally feel like a necessary evil to take advantage of most types of insurance—and homeowners insurance is no exception. Be prepared to part with between $500 and $2,000 per covered event, depending on your specific policy.
Opting for a $500 deductible may seem like a no-brainer, but just remember that a lower deductible means higher premiums. But if you live in a higher-risk area (frequent hail, for example), it could be worth paying that higher premium to reduce your out-of-pocket costs on each claim.
Frequently asked questions
Do all homeowners insurance claims require a deductible?
No, not all home insurance claims require a deductible. Nevertheless, you can generally expect to pay a deductible on dwelling, personal property, and other structures insurance claims.
Does a higher deductible always lower your insurance premiums?
Yes, higher deductibles result in lower premiums.
Should you file a claim if the repair cost is close to your deductible?
No, you shouldn’t file an insurance claim if the cost of repairs is close to your deductible, since any immediate cost savings may be undone by a long-term spike in your insurance prices due to filing a claim.
How do home insurance deductibles work after filing a claim?
After you file a home insurance claim, you won’t have to submit a deductible payment to your insurer to get the claim approved. Instead, as its name suggests, the deductible is automatically deducted from your insurance payout.
Can you change your home insurance deductible?
Yes, you can generally change your home insurance deductible when you purchase a policy or renew your coverage. Some insurers may also allow you to change your deductible midterm, though availability and restrictions vary by company.
What is the average home insurance deductible?
Most homeowners select a $1,000 deductible, but normal home insurance deductible amounts frequently range from $500 to $2,000.
