What Is a Homeowners Insurance Deductible?

What Is a Homeowners Insurance Deductible?

A homeowners insurance deductible is the amount of money you're financially responsible to pay when you file an insurance claim. Usually, your deductible is subtracted from your insurance settlement when your claim is approved.

Different parts of your policy may also have different deductibles. For example, you may have a separate deductible for hurricane, wind or hail coverage. In addition, standalone policies such as earthquake insurance and flood insurance usually have their own deductibles.

Learn more: Homeowners Insurance Extras to Consider

Types of Homeowners Insurance Deductibles

Depending on your policy, your home insurance deductible may be a flat rate or a percentage. A flat-rate deductible is a set dollar amount, such as $1,000. A percentage-based deductible is a percentage of your property's insured value.

If you have $300,000 in home insurance coverage and file a claim for damage that will cost $10,000 to repair, here's how the different types of deductibles would work.

Example:

• Flat-rate deductible: $1,000
• Payout: $10,000 - $1,000 = $9,000

In this example, it's probably worth filing a claim, because repairs will cost significantly more than your deductible.

Example:

• Percentage deductible: 3%, or $9,000 (3% of $300,000)
• Payout: $10,000 - $9,000 = $1,000

In this example, it's probably not worth filing a claim. Even with the payout, you'll still have to cover most of the repair cost yourself, and filing a claim could cause your premiums to rise.

Learn more: Does Filing a Home Insurance Claim Raise Your Rates?

What Is a Disaster Deductible?

A disaster deductible is a separate homeowners insurance deductible that applies to damage caused by wind and hail, floods, earthquakes or hurricanes. If you live in an area where such natural disasters occur, be sure you understand any deductibles for this type of coverage.

Hurricane Deductibles

Standard home insurance covers hurricanes, but hurricane damage may have special deductibles that are usually higher than standard deductibles. Hurricane deductibles are typically percentage-based, although in some areas you can get a flat-rate deductible by paying higher premiums. In general, hurricane deductibles range from 1% to 5% of a home's insured value, but in some areas where the risk of hurricanes is high, percentages may be higher than 5%. The hurricane deductible may be payable each time you file a claim for hurricane damage, or only once per hurricane season or per year. Check your policy for details about your hurricane deductible.

Wind and Hail Deductibles

Wind and hail damage is generally covered by home insurance, but you may have separate wind and hail deductibles if you live in a region prone to windstorms, tornadoes or hailstorms. Like hurricane deductibles, wind and hail deductibles are usually percentage-based, ranging from 1% to 5% of the home's insured value, and may be payable per claim, per season or per year.

Flood Deductibles

Deductibles for flood insurance vary depending on your location and insurance carrier and may be offered as a flat rate or a percentage of your home's insured value. There is generally one flood deductible for your personal property and another deductible for your dwelling.

Standard home insurance doesn't cover damage from floods; you'll need to buy a separate flood insurance policy to get coverage for this risk. If your home is mortgaged, your mortgage lender may require the flood deductible to be under a specific amount so you can afford to pay it.

Earthquake Deductibles

Earthquake insurance deductibles are percentage-based and may range from 2% to 25% of your home's insured value, depending on earthquake risk where you live. States may set minimum deductibles depending on your property's age, insured value and other factors.

Example: The minimum deductible for policies sold by the California Earthquake Authority is 5%; however, that rises to 15% for homes that are insured for over $1 million or homes built before 1980 that don't meet earthquake safety standards.

There may also be separate earthquake deductibles for dwelling and personal property coverage. Since standard homeowners insurance doesn't cover earthquake damage, you'll have to purchase separate earthquake insurance to get coverage.

Learn more: What Is Not Covered by Homeowners Insurance?

How Does a Homeowners Insurance Deductible Work?

Here's how a home insurance deductible works.

1. You file a claim. You can usually start this process using your insurance company's app or website or by calling the insurance company. They can help you determine if your claim will be covered, calculate what your deductible will be and explain the next steps.
2. You're assigned to a claims adjuster. The adjuster will assess the damage, typically by visiting your home. They'll also ask you for documentation, such as receipts for damaged possessions, home inventory lists or photos or videos of your home and belongings.
3. The insurance company determines your settlement amount. You can contact contractors to get quotes for repairs. This can help the insurer calculate your insurance settlement.
4. Your deductible is subtracted from the settlement. The settlement minus the deductible is the total payout you'll receive.
5. You get paid. You may receive the entire payout or an advance on the payout. If you have a mortgage, the check may go straight to your mortgage lender, or be made out to both you and the lender. To get reimbursed for personal property, you generally need to replace the items, then submit a list of the items and receipts.

Tip: If a crime occurred—for instance, your house was burglarized or vandalized—call the police before filing your insurance claim. The police report will be used to document your claim.

Learn more: What Happens When You File a Homeowners Insurance Claim?

How Much Is a Homeowners Insurance Deductible?

Your homeowners insurance deductible can vary depending on a variety of factors, including whether you have a flat rate or percentage deductible.

• Flat-rate deductibles generally range from $500 to $2,500, although some go as high as $5,000.
• Percentage deductibles usually range from 1% to 10% of the property's insured value.
• Disaster deductibles can range from 1% to 25% of the home's insured value, depending on the type of policy.

Learn more: How Much Homeowners Insurance Do You Need?

When Do You Pay the Deductible for Homeowners Insurance?

You typically pay a home insurance deductible whenever you file a home insurance claim. For example, if you filed a claim for water damage in January, a second claim for a home burglary in May and a third claim for a house fire in July, you'd pay three separate deductibles.

There are some exceptions, however. For example, in Florida, homeowners only have to pay one hurricane deductible per calendar year, even if they file multiple hurricane-related claims that year. Check your coverage to see when you need to pay a deductible.

How a Home Insurance Deductible Affects Your Premium

In general, a lower homeowners insurance deductible means higher premiums, and a higher deductible means lower premiums. Most homeowners insurance policies give you some flexibility to choose your deductible.

Raising your deductible can save money because you're taking on more financial risk. However, a higher deductible means you'll receive a smaller payout if you have a claim. If the deductible is too high, you might struggle to pay for the loss.

Conversely, a policy with a lower deductible delivers a bigger payout if you have a claim. However, your premiums will be higher, leaving less in your budget to put toward savings or other expenses.

Tip: Raising your home insurance deductible to $1,000 can save you up to 25% on homeowners insurance, according to the Insurance Information Institute.

Learn more: Is a High Deductible Better Than a Low Deductible?

How to Choose the Right Homeowners Insurance Deductible

Consider these factors when choosing your homeowners insurance deductible.

• Can you afford a high deductible? A higher deductible can lower your insurance premiums but could cost you thousands of dollars out of pocket if you file a claim. If you don't have sufficient emergency savings, a lower deductible may make more financial sense.
• Can you afford the premiums? Homeowners insurance is an important safeguard against catastrophic loss. If raising your deductible is the only way to afford coverage, that may be your best option.
• How likely are you to file a claim? Since claims cause your rates to rise, it's best to limit claims to major repairs you couldn't cover yourself. A higher deductible and lower premiums could leave room in your budget to save for smaller home repairs.
• Are you in a high-risk area? Forgoing homeowners insurance is always risky, but especially so in areas prone to natural disasters. In this situation, you may need to settle for whatever deductible makes premiums affordable.

Tip: Visit insurance company websites or online marketplaces, or talk to an insurance agent to compare home insurance policies and see how adjusting deductibles might affect your premiums.

Learn more: Do You Have to Have Homeowners Insurance?

Frequently Asked Questions

The Bottom Line

Understanding how home insurance deductibles work will help you make an informed decision when shopping for home insurance. Raising your deductible is a popular way to save on home insurance, but a good credit score may help too. In many states, insurance carriers check your credit-based insurance score when setting rates. This score differs from your regular credit score but is based on many of the same factors.

Checking your credit score before applying for homeowners insurance can give you an idea of what insurers may see. Paying bills on time and paying down debt could help boost your credit score—and lower your insurance premiums.