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 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.
» MORE:What does homeowners insurance cover?
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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 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. A single claim raises your premium by 9% on average, according to NerdWallet’s rate analysis. So ultimately, your insurer may effectively cancel out that $200 payout with a higher rate at your next renewal.
🤓Nerdy Tip
You'll pay a deductible for each claim. So if you file a claim for roof damage in May and a theft claim in July, you'll pay your deductible both times.
» MORE:How to buy homeowners insurance for the first time
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.
» MORE: Complete guide to hurricane insurance
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 damages 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.
A homeowners insurance deductible is the part of a claim you'll pay out of pocket. Sarah Schlichter is a NerdWallet authority on homeowners, renters and pet insurance. Prior to joining NerdWallet, she spent more than 15 years in digital media as a writer, editor and spokesperson.
Some insurance companies will pay the repair shop based on the estimated cost of the repairs, minus the deductible. In this case, you may be able to negotiate a payment plan with the pair shop or at least determine how long you have to schedule the repair before the insurance refuses to pay.
There aren't any hard statistics on this, but industry sources say a $500 deductible is considered “standard.” There are good reasons to opt for a higher deductible, though…
Costs of wind/hail deductibles are usually calculated in one of two ways, Bonelli says. Homeowners may pay a flat amount such as $1,000 or $2,000 per claim. Or, more commonly, homeowners may pay a percentage of their home insurance coverage, typically between 1 and 5 percent, according to the III.
What Is the Average Deductible Cost for Homeowners Insurance? The average cost of a $500 deductible for a $350,000 home insurance policy is $1,710. By increasing that deductible to $1,000, you can save $115 annually on average. Raising it to $1,500 or $2,000 may lower your premium even more.
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.
What many homeowners don't know, however, is that some policies will waive your deductible when certain circ*mstances apply. When your total claim reaches a certain dollar amount, for example, you might not have to pay your deductible. For example, after a fire, you make a home insurance claim of $50,000 for repairs.
What if my car repair costs less than my deductible? There may be times when your car insurance deductible is more than the cost of the damage to your vehicle. Unfortunately, in these cases, you'll need to pay for all repairs out-of-pocket.
In most cases — no. But you may be able to claim a deduction if you work from home, rent out your home, or have a home insurance claim that wasn't fully covered.
The benefits of a high-deductible versus a low-deductible medical plan. In 2023, health insurance plans with deductibles over $1,500 for an individual and $3,000 for a family are considered high-deductible plans.
Accidents can happen at any moment, so if you don't have a lot of savings or expendable income, a lower deductible is usually a safer choice to avoid financial stress after an accident.
With an HDHP, it can be challenging to predict how much you'll need to pay when you need care. That's why a high deductible plan works better for those who can handle taking on greater financial risk. A low deductible plan comes with lower financial risk, though you'll pay more each month for coverage.
What is the standard homeowners insurance deductible? 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.
Determining the amount of your wind and hail deductible
Coastal areas or areas that typically experience wind and hail likely will have more expensive policies. An insurer might offer policyholders the option to pay a higher premium for a fixed-rate deductible rather than a percentage deductible.
Extended dwelling coverage provides an additional layer of protection in case the cost to rebuild your home exceeds your dwelling coverage limit. This coverage is especially important in areas that are prone to natural disasters, such as hurricanes, tornadoes, and wildfires.
Before you choose a deductible, most insurance professionals recommend you figure out what you can afford to pay if your car is damaged in an accident. If your budget allows for a maximum out-of-pocket expense of $500, you probably should not choose a deductible higher than $500.
A homeowners insurance deductible is the amount of money you'll pay out of pocket before your insurance company will pay on the claim. You'll choose your deductible amount when building your policy, but you will only pay a deductible if you file a claim.
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.
Key takeaways. Low deductibles are best when an illness or injury requires extensive medical care. High-deductible plans offer more manageable premiums and access to HSAs. HSAs offer a trio of tax benefits and can be a source of retirement income.
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