Homeowners Are Increasing Insurance Deductibles to $5,000 or More to Save Money (2024)

FAQs

Should I increase my homeowners deductible? ›

While increasing your deductible can be risky, it's a better option than skipping insurance, underinsuring a home or letting a policy lapse, experts say.

When you're choosing a deductible, keep in mind that you may be more or less comfortable with higher out-of-pocket costs vs monthly costs. A high deductible will lower your overall insurance rate, however it will increase your out-of-pocket costs if you file a claim.

You don't want to pick a deductible amount that's so high that you can't afford to repair your home if you experience a covered claim. If you have a low tolerance for risk, and you can afford a higher premium, then you may want to choose a lower deductible amount.

With a higher deductible you'll pay more out of pocket, but your car insurance rate will be lower.

The IRS considers homeowners insurance to be a non-deductible personal expense. However, there could be some situations or business purposes where you may be able to partially deduct certain expenses, like if you run a business out of your home.

For example, raising your deductible from $1,000 to $2,500 can save you almost 13% 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.

A higher deductible means you'll pay lower premiums, allowing you to save money overall as long as you drive safely and avoid filing claims. Just make sure you can afford to pay $1,000 if necessary.

On average, raising your deductible will save $408 a year. A higher home insurance deductible means lower insurance premiums, and vice-versa, but you should be able to afford your deductible in the event of a claim.

However, most home insurance policy deductibles tend to be from $100 to $5,000. The average home insurance deductible is $1,000.

A lower deductible plan is a great choice if you have unique medical concerns or chronic conditions that need frequent treatment. While this plan has a higher monthly premium, if you go to the doctor often or you're at risk of a possible medical emergency, you have a more affordable deductible.

What are the pros and cons of having a high deductible? ›

High deductible health plans can be a great option for healthy individuals and families who don't need a lot of medical care. They offer lower monthly premiums and tax benefits through HSAs. But, if you need a lot of medical care, high deductible health plans can be expensive.

You choose your deductible at the time you purchase home insurance, but you can change it at any time during your policy term. The amount you pay in homeowners insurance premiums is directly correlated with how high or low you set your deductible. The higher your deductible, the lower your premiums — and vice versa.

If you increase your deductible, you'll pay less on a monthly basis for coverage because you will end up paying more out of pocket if you file a claim. Choosing your deductible is about balancing your budget and the amount of risk you can tolerate.

And if you choose a higher deductible, you'll pay less for your car insurance premium, but should you have a claim, you'll have to pay more out of pocket for damages. Regardless of the deductible you choose, you're agreeing to self-insure up to a certain limit before your insurer kicks in their portion of coverage.

Policies with lower deductibles typically have higher premiums, meaning you'll pay more each month for your insurance coverage. However, if you have a higher deductible, you may be able to save money on your premiums but may be responsible for paying more out of pocket if you need to file a claim.

Typically, homeowners choose a $1,000 deductible (for flat deductibles), with $500 and $2,000 also being common amounts. Though those are the most standard deductible amounts selected, you can opt for even higher deductibles to save more on your premium.

With a high-deductible health plan, your out-of-pocket costs may be higher. If something unexpected happens you must be financially prepared to cover the high deductible. Avoiding Care. Those high payments for medical care might keep you away from checkups and other preventative measures.

On average, raising your deductible will save $408 a year. A higher home insurance deductible means lower insurance premiums, and vice-versa, but you should be able to afford your deductible in the event of a claim.