What Is a Home Insurance Deductible?
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If someone steals your laptop or a storm damages your home, your homeowners insurance policy can help — but it won't pay for everything. Your policy likely has a homeowners insurance deductible, leaving you with a lower claim payout. Here's how it works.
What is a homeowners insurance deductible?
A homeowners insurance deductible is the amount of a home insurance claim you're responsible for paying out of pocket. For example, say you have a $1,000 deductible on your policy and submit a claim for $8,000 for storm damage. Your insurer will pay $7,000 toward the cost of repairs, and you'll cover the remaining $1,000.
You'll usually have several deductible amounts to choose from when you buy homeowners insurance. The higher the deductible you choose, the less you'll pay for your policy. For example, raising your deductible from $1,000 to $2,500 can save you 12% on your premium on average, according to NerdWallet's rate analysis.
Before choosing a higher deductible, ensure you can cover that amount if you ever have to file a claim.
When do you pay the deductible for homeowners insurance?
You won't pay a deductible unless you file a claim. Even then, a deductible applies only to claims on certain sections of your homeowners policy:
Dwelling coverage, which pays for damage to the structure of your home.
Other structures coverage, which pays for damage to detached structures like a shed or fence.
Personal property coverage, which pays to repair or replace damaged belongings.
There's generally no deductible for personal liability, medical payments or loss of use claims.
Note that you don't pay your deductible to your insurance company. Instead, you'll put the insurer's claim payout plus your deductible amount toward recovery after a claim. That could include buying new belongings to replace damaged ones or paying a contractor to repair or rebuild your home.
It's wise to consider your deductible when deciding whether to file a claim. For example, if your deductible is $1,000 and you file a claim for $1,200 worth of damage, you'll get a payout of $200.
While that may seem worth it, keep in mind that insurance companies often raise your premium after you file a claim. So ultimately, your insurer may effectively cancel out that $200 payout with a higher rate at your next renewal.
You'll pay a deductible for each claim. So if you file a claim for roof damage in May and another claim for theft in July, you'll pay your deductible both times.
What's the average homeowners insurance deductible?
Typical homeowners insurance deductibles range from $500 to $2,000, though lower and higher amounts may also be available.
However, not all home insurance deductibles are flat dollar amounts. Instead, some are percentages of your home's insured value, such as 1% or 2%. There are a few essential things to know about percentage deductibles:
They're often required for natural disasters such as hurricanes, wind and hail, even if the rest of your policy has a dollar amount deductible. (In these cases, the dollar deductible may be called an "all other perils" deductible.)
Even a small percentage can add up to a significant expense. For example, let's say your home has an insured value of $300,000 and a 5% deductible for hurricanes. If it's damaged in a storm, you'd be responsible for up to $15,000 before your insurance company starts paying.
If the insured value of your home goes up, so does your deductible. Using the same example from above, say an addition or renovation increases the insured value of your home to $325,000. With the same 5% deductible, you'd now have to pay $16,250 before insurance kicks in.
Flood and earthquake insurance deductibles
Depending on where you live, your mortgage lender might require you to purchase flood insurance in addition to your homeowners policy. As with homeowners insurance, you can lower your flood insurance premium by choosing a higher deductible. However, doing so on a flood policy could be a little riskier.
That's because most flood insurance policies have two separate deductibles — one for the physical structure of your home and one for your belongings. So if a flood causes damage to both, you'd have to make two separate claims and pay two separate deductibles.
Your deductible burden could also be high if you buy earthquake insurance. For example, the California Earthquake Authority offers deductibles ranging from 5% to 25% of your home's insured value. That means you could be responsible for up to $75,000 in damage on a house with $300,000 of building coverage.
Separate building and belongings coverage deductibles may also apply to earthquake insurance policies.
NerdWallet averaged rates for 40-year-old homeowners from a variety of insurance companies in every ZIP code across all 50 states and Washington, D.C. Sample homeowners were nonsmokers with good credit living in a single-family, two-story home built in 1997. They had a $1,000 deductible and the following coverage limits:
$300,000 in dwelling coverage.
$30,000 in other structures coverage.
$150,000 in personal property coverage.
$60,000 in loss of use coverage.
$300,000 in liability coverage.
$1,000 in medical payments coverage.
We used the same assumptions for all other homeowner profiles, with the following exceptions:
For homeowners with a claims history, we added a single wind or water damage claim.
For homeowners with a higher deductible, we raised the deductible to $2,500.
These are sample rates generated through Quadrant Information Services. Your own rates will be different.