What Is Homeowners Insurance Deductible?

The deductible on your homeowners insurance is the amount of money you agree to pay before filing a claim with your provider. Because it affects the cost of your homeowners insurance as well as the coverage you can use, selecting the right deductible is critical to obtaining the best homeowners insurance policy.

We'll go over how your homeowners insurance deductible affects the cost of your policy in the section below. We analyzed thousands of quotes to demonstrate how adjusting your homeowners insurance deductible can be an important part of comparing quotes and determining the best coverage for you.

Understanding homeowners insurance deductibles

Before you can make claims on any damaged or stolen property covered by your policy, you must pay a homeowners insurance deductible.

While every home insurance policy includes a deductible, you do have some control over the amount of the deductible. Homeowners insurance companies present their deductibles in a variety of ways. For example, you may be able to select deductibles of $500, $1,000, or $2,500. If you choose a higher deductible, your premium will be lower, and vice versa.

Alternatively, some companies set the deductible as a percentage of the coverage levels in your policy. Assume your home is insured up to $300,000 and your deductible is equal to 1% of the coverage limit. When filing a claim, instead of paying a set amount, you would pay $3,000.

For specific types of covered perils, percentage-based deductibles are commonly available. For example, in states or regions where homeowners are more likely to experience wind damage or hail, insurers will often assign a separate percentage-based deductible rather than a flat amount to these perils.

When should you choose a percentage-based deductible?

There are a few situations in which choosing a percentage-based deductible may be advantageous. If you own a costly home and can afford to pay for minor repairs out of pocket, a percentage-based deductible could help you save money on your premiums.

If you had a $1 million home insured and chose a 1% deductible of $10,000, you would bear a greater share of the risk than if you had chosen a $2,500 flat-rate deductible. As a result, your premium will be reduced.

A percentage-based deductible may also be advantageous for a homeowner who wants to gradually increase their deductible. Assume you own a $150,000 home with a $1,000 deductible. You want to raise your deductible and lower your premiums, but you don't want to commit to a $2,500 deductible, which is typically the next increment offered by many companies.

With a 1% deductible, the amount you'd have to pay would rise from $1,000 to $1,500 rather than $2,500, which is a much more manageable increase for the average homeowner.

Flood insurance deductibles

Your flood insurance provider, like regular homeowners insurance, requires you to pay a deductible on claims. If you purchase flood insurance through the National Flood Insurance Program (NFIP), you may be eligible for premium discounts based on the size of your deductible.

If you have coverage through a private flood insurance company, you may be given the option of a $2,000 or $5,000 deductible. The amount you choose, as with regular homeowners insurance deductibles, affects your premium.

What is the standard deductible for homeowners insurance?

For homeowners insurance, there is no standard deductible. However, most companies offer $1,000 and higher deductibles. Many companies offer $500 or even $250 deductibles on homeowners insurance. Companies rarely offer no-deductible policies, and when they do, the premiums are higher.

A deductible of at least $1,000 is generally recommended. While this means you'd have to pay $1,000 to file a claim, having a higher deductible on your homeowners insurance lowers your premiums — often significantly.

When deciding on a homeowners insurance deductible, strike a balance that works for your budget and the amount of property you can afford to replace out of pocket.

However, you should not raise your deductible all the way. When selecting a homeowners insurance deductible, keep in mind that the amount you choose precludes you from filing any claims for amounts less than that amount.

For example, if you have a $10,000 deductible, you may have a low premium, but you will only be able to make a claim for damage that exceeds $10,000. In this case, if your $1,500 laptop was stolen, the loss would be dwarfed by your high deductible, leaving you to pay for the laptop out of pocket. In this case, a $1,000 deductible would allow you to recover at least $500 of the laptop's value.

On the other hand, because filing claims raises your premiums, you could choose a higher deductible (and a lower premium) if you don't mind not filing claims for minor losses. If you had a $10,000 deductible and could replace the $1,500 laptop without the assistance of your insurer, then the lower coverage may be worth foregoing the ability to make claims on less-expensive items.

How does your homeowners insurance deductible amount influence your premium?

We gathered thousands of quotes from the nation's largest insurance companies to demonstrate how changing your homeowners insurance deductible can affect the rates you pay for coverage. We discovered that the average cost of homeowners insurance varies by nearly $500 per year depending on the deductible you choose.

Raising your deductible from $500 to $1,000 could result in a 13% reduction in your homeowners insurance premium.

We also discovered that increasing your homeowners insurance deductible from $500 to $5,000 can reduce your premium by about one-third, regardless of your insurance provider. However, given the disparity in premiums for the same amount of coverage, it's a good idea to compare homeowners insurance quotes, as shown in the table below.

Methodology

We generated quotes for a typical property: a 1968 home insured for $250,000. We obtained quotes with four deductibles: $500, $1,000, $2,500, and $5,000. Then we averaged the rates we received for each company and deductible.

The insurance rate data used in LowCostInsurance analysis came from Quadrant Information Services. These rates were obtained publicly from insurer filings and should only be used for comparison purposes — your own quotes may differ.