What is a homeowners insurance deductible?

If you’re looking for homeowners insurance, it’s important to know how a homeowners insurance deductible works. (Shutterstock)

When you own a home, homeowners insurance can cover the cost of repairing or rebuilding your home if disaster strikes. But most homeowners insurance comes with a deductible — the amount you’ll have to pay out of pocket before your insurance begins paying. 

If you’re looking to buy homeowners insurance, it’s essential to choose the right deductible, as it directly affects your premium amount and your ability to repair your home if you have to file a claim. Keep reading to learn more about homeowners insurance deductibles, choosing a deductible amount, and how to reduce your deductible.

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• What is a homeowners insurance deductible?
• How does a homeowners insurance deductible work?
• Common types of homeowners insurance deductibles
• What are disaster deductibles for homeowners insurance?
• How to choose a homeowners insurance deductible
• How to lower your homeowners insurance deductible

What is a homeowners insurance deductible?

A homeowners insurance deductible is the amount of money you’re responsible for paying if you make a claim. Your insurance coverage then covers the remaining amount.  

If you’re shopping for a home, it’s important to know that most mortgage lenders require you to carry homeowners insurance, so you must choose a deductible amount and purchase a policy that takes effect before you close on your home.

How much is the standard homeowners insurance deductible?

While there’s no set standard on dollar amounts for homeowners insurance deductibles, many homeowners opt for a flat $1,000 deductible. Common deductible amounts range from $500 to $2,000, with even higher deductibles available for those looking to save on their monthly payments. 

Many insurers recommend carrying a deductible of at least $500, but if you can afford to boost the deductible to $1,000, you may be able to save up to 25% on your homeowners insurance premiums.

How does a homeowners insurance deductible work?

Let’s say a tree falls on your house, causing $15,000 worth of roof damage. If your deductible is $1,000, you’d pay that amount and the insurer would pay the rest of the claim. 

If you’re looking to purchase homeowners insurance, remember that the higher your deductible is, the lower your premium will be and vice versa. While your monthly insurance premium amount is an important consideration, it’s also wise to select a deductible amount you can reasonably afford if you have to file a claim.

When do you pay a homeowners insurance deductible?

Generally, you won’t pay your deductible to the insurance company — it will be subtracted from the amount your insurer pays you. In the above example, you’d receive $14,000 from the insurance company after your $1,000 deductible is subtracted from your $15,000 claim. 

Keep in mind that just because you’ve paid a deductible on one claim doesn’t mean you won’t have to pay it on a future claim. You’ll typically be responsible for paying your deductible for each claim you file with your homeowners insurance company.

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Common types of homeowners insurance deductibles

When you get a homeowners insurance policy, you’ll likely have three types of deductibles to choose from — flat deductible, percentage deductible, and split deductible. Here’s how each deductible works: 

Flat deductible

A flat deductible is a fixed dollar amount you agree to pay upfront when you file a claim. No matter how much the home damage costs, the flat deductible remains the same. In the roof example above, the flat deductible amount was $1,000.

The primary benefit of a flat deductible is that it may save you money if you have an expensive claim. If your flat deductible is $1,000, that’s all you’ll pay upfront, regardless of the claim amount.

Percentage deductible

With a percentage deductible, your deductible amount is a specific percentage of your home’s insured value. That means if your home is insured for $300,000 and your deductible is 2%, you’d be responsible for the $6,000 deductible if you make a claim. You may be able to reduce your insurance premium amount by raising your percentage deductible. 

Split deductible

Some insurance companies offer a split deductible, which combines a flat deductible with a percentage deductible. Some of your home insurance coverage categories could have a flat deductible, while others come with a percentage deductible. For example, a claim for weather-related damage might have a percentage deductible, while a claim for damage from a blown water pipe could come with a flat deductible.

What are disaster deductibles for homeowners insurance?

Insurers often require policyholders to carry specific insurance covering natural disasters, especially if they’re common where you live. Even if your insurance company doesn’t require it, you may wish to add natural disaster coverage to your homeowners insurance policy to protect your home. Here’s a closer look at how deductibles may work for common types of natural disaster coverage:

Earthquake

If you live in an area at high risk for earthquakes, your standard homeowners insurance policy likely doesn’t cover earthquake damage. That means you’ll need to get earthquake insurance with a percentage-based deductible ranging from 2% up to 20% of your home’s replacement value. For example, a California Earthquake Authority (CEA) policy comes with a 15% deductible.

Flood

Flood deductibles vary depending on the insurance company and the state where you live. You may be able to purchase flood insurance coverage with either a flat or percentage deductible. Your insurer may also give you the option to choose one type of deductible for your house and another deductible type for all your belongings.

Hurricane

In states with a higher likelihood of hurricanes, a hurricane deductible may apply if you file a claim for hurricane damage to your home. Your home insurance company may set a "trigger," such as when the National Weather Service officially names the hurricane or issues a hurricane watch or warning.

Hurricane deductibles are typically percentage-based and are often higher than your standard homeowners insurance deductible. Your state may give you the option of a flat deductible, along with higher premiums. But some home insurance companies in high-risk coastal regions mandate the percentage deductible.

Wind and hail

Wind and hail deductibles are common in the Midwest and Tornado Alley states, where extreme storms, tornadoes, and straight-line winds occur more frequently. Most wind and hail deductibles are percentage-based and range from 1% to 5% of your home’s insured value.

How to choose a homeowners insurance deductible

Choosing a homeowners insurance policy comes down to affordability of both your premium and deductible costs. Consider these steps to help you choose the best home insurance policy and deductible for you and your family:

• Determine what deductible amount you can comfortably afford. The whole idea behind homeowners insurance is to repair or rebuild your home if it suffers damage. It won’t do you much good if the deductible is so high you can’t afford to file a claim, so make sure you can reasonably afford to cover the deductible if the unexpected happens.
• Find the balance between premium and deductible costs. Run the numbers to determine if raising your deductible — so long as it’s within your budget — would provide enough premium savings to make the switch worthwhile.
• Shop around and compare homeowners insurance policies and deductibles. As with most insurance policies, its good practice to shop around and compare quotes from multiple carriers to make sure you’re getting the best homeowners insurance coverage, rate, and deductible for your situation.

If you’re shopping for a new home insurance policy, Credible lets you compare home insurance quotes from multiple carriers in minutes.

How to lower your homeowners insurance deductible

You can usually lower your homeowners insurance deductible by contacting your insurer and agreeing to raise your premiums in exchange for a lower deductible. 

You can make changes like this to your policy any time. But if you’ve already paid your premium for the year, you may want to wait until your policy expires to avoid any hassle. If you choose to make a change before your current policy expires, read your policy or check with your insurer to make sure you won’t incur any penalties or fees.