Your Homeowners Insurance Deductible: A Guide

When you set your homeowners insurance policy, choosing your deductible is one of the most important decisions you’ll make during the process. Read on to learn the average deductible for homeowners insurance and what to consider when choosing yours. And don’t forget to compare your home insurance quotes with the quote comparison tool from Insurify.

Your Home Insurance Deductible

The deductible on your insurance policy is the amount you will always have to pay out of pocket before your insurance company pays out the rest of your insurance claim. For homeowners insurance, this is usually a fixed dollar amount between $200 and $2,500.

Let’s say you have a $ 500 deductible and a flood causes $12,000 in damage to your home. When you file a claim and your insurance company approves it, you won’t get the whole $12,000 paid by the insurer. First, you have to pay the $ 500 deductible on your policy, and then the insurance company covers the remaining $11,500.

For homeowner’s insurance, the deductible typically applies to every claim you make on your insurance policy.

What is the average deductible for homeowners insurance?

The average deductible for homeowners insurance is $500. Given that even a $ 500 deductible can break the bank for a lot of families, choosing the right deductible is critical. It’s a decision full of trade-offs that should balance whether your home is in a high-risk area, your personal finances, and the home insurance premiums you’ll pay on your policy.

See more: Average Cost of Homeowners Insurance

How to Choose Your Home Insurance Deductible

Before you decide what you want your deductible amount to be, ask your insurance agent to create several insurance quotes that will show you how your deductible affects your premium. Typically, a higher deductible will mean a lower monthly premium and vice versa, but you’ll want to know exactly how much. Ask for several options.

It will be tempting to choose a high deductible for your policy because you’ll pay a lower monthly insurance premium. But the decision is usually more complicated than that. When disaster strikes, you’ll want to make sure you can pay that deductible out of pocket. Otherwise, there’s no point in having a home insurance policy in the first place!

A standard deductible for homeowners insurance will range from $200 to $2,500, depending on the state you’re in, your insurance company, and the coverage amount on your policy. If you can pay $1,000 as easily as you can a latté or a candy bar, you might opt for a higher deductible that will lower your monthly insurance premium.

But sometimes, the high deductibles offered by insurance companies won’t lower your home insurance rates so dramatically as to make it worth it. A lower deductible will come with a higher premium, but when it comes time to make an insurance claim, you won’t get dinged with a big amount out of pocket.

Most homeowners insurance deductibles fall between $500 and $1,000. The key is to find a homeowners insurance deductible that you can comfortably pay in an emergency but isn’t so low that you’re paying a higher premium than you should be. Your insurance agent can help with this.

You can also lower your homeowners insurance rates by paying an annual premium instead of monthly. If you have the cash on hand to pay a year’s worth of your homeowners insurance premium out of pocket at the start of the year, you could use the savings to put a lower deductible on your policy. Then, you’re better off when filing a claim.

Another trade-off when setting your homeowners insurance deductible: whenever you make a claim, your insurance premium is likely to climb. This is relevant if you have a low deductible and are considering making a relatively small claim on your homeowners insurance. Will it be worth a future increase in your premium? If not, is the low deductible worth it, too?

Flat Deductible vs. Percentage Deductible

Most homeowners insurance deductibles are dollar amounts. This is also called a flat deductible, and other insurance policies, such as auto insurance, tend to use this kind of deductible.

Some parts of your homeowners insurance coverage might include a percentage deductible, which uses a percentage of your home’s insured value or coverage limits, usually 1–3 percent, to determine the deductible. Percentage deductibles are most common for flood insurance and other disasters, like windstorms, hurricanes, and hail.

For example, a percentage deductible of 1 percent on a home insured for $300,000 will be $3,000. Insurers use percentages for disaster deductibles in high-risk areas to effectively charge higher premiums for disasters that are likely to max out the policy’s coverage limits in a single claim.

Disaster Deductibles

If you live in a high-risk area— California, Texas, Florida, or Kansas, let’s say—you’ll need to buy separate policies for flooding, hurricanes, windstorms, earthquakes, and other natural disasters. These apply to disasters named by the National Weather Service, and they each come with separate deductibles—often a percentage deductible.

Policyholders should be especially wary of disaster deductibles because a claim from a natural disaster that wipes out your house could result in you paying a very high deductible if the percentage is high and you’re claiming up to your coverage limit. If you’re very worried about your home, a super high deductible might not justify a lower premium.

Hurricane deductibles tend to only apply once every season but check with your insurance provider because homeowners insurance companies vary their policies.

Frequently Asked Questions

How to Set Your Deductible

Standard homeowners insurance deductibles tend to land between $500 and $1,000. If you can afford it, go higher. But ask your insurance agent for their advice, and make sure they give you a few options for you to compare. To save money on your homeowners insurance policy, be sure to compare quotes before you sign on the dotted line. You could save hundreds by comparing home insurance quotes from different insurance companies. You can do that in one place thanks to Insurify.