Homeowners insurance deductible: How to choose the right one

How to choose a homeowners insurance deductible

The best deductible for homeowners insurance often depends on your financial situation. To choose a deductible, consider a few factors:

1. How much can you afford to pay annually, or monthly, for your homeowners insurance? Choosing a higher deductible will reduce what you pay in premiums, so if you prefer to pay less upfront, choose a higher deductible amount.
2. How much can you afford to pay if you file a claim? You will have to pay the deductible amount if you file a claim, so be certain you can afford the one you select. If you go with a higher deductible, consider stashing the money you save away in a savings account to use if you need to pay the deductible.
3. How likely are you to file a claim in the next few years? If you need to save up to have the deductible ready, consider the risks in your area and how likely it is that you’ll need to file a claim before you can put the savings aside. Is your area prone to hurricanes? Hail storms? And, of course, consider the reality that something can go wrong at any time.
4. Can you pay for smaller repairs out of pocket? Having a high deductible means you can’t submit a claim for any damage under that amount. So, if you have a $2,500 deductible, you need to be prepared to pay for any damage under that amount yourself.

Remember, you can change your deductible at any time if your financial situation changes. Select the one that makes the most sense for you right now and change it if necessary.

How does your deductible affect your homeowners insurance rates?

Depending on your insurance company and coverage, increasing your deductible can reduce your payments by between 20% and 40%.

An Insurance.com rate analysis of how much you can save in every state by hiking your homeowners deductible shows homeowners can trim an average of $512 off their premium by increasing a $500 deductible to $2,500. 

Oklahoma homeowners, who pay the most for home insurance nationwide, save the most by increasing their deductibles from $500 to $2,500. They can save an average of $1,228 each year. The smallest savings is in Maryland, at only $74.

Below, you can see the average cost of a home insurance policy in your state at various deductibles. Rates are based on a policy with $300,000 in dwelling coverage and liability.

When using Insurance.com's average home insurance rate by ZIP code tool, you can choose among six deductible amounts to see how premiums compare based on deductible, dwelling, and liability amounts.

The company you choose also matters. Not all companies offer the same deductible options, and options vary by state, but we averaged our company data across all states to provide estimates in the table below.

What is the standard deductible for homeowners insurance?

There is no standard deductible, but the average homeowners insurance deductible is $500.

“Not all that long ago, a $100 deductible was the standard deductible amount, but in keeping with inflation, the standard moved to $250. As property claims started to escalate and new coverages were developed, it wasn’t long until $500 became the new standard,” said P.J. Miller, insurance agent, Wallace & Turner Insurance in Springfield, Ohio.

Miller added that many insurance companies also offer disappearing deductibles. In those cases, companies reduce your deductibles if you don't file a claim over a period. So, your $500 deductible may shrink to $100 if you don't make a claim in three years.

Miller said some insurers have also attached higher deductibles to roof claims. Insurance companies usually want homeowners to replace their roof after 20 or 30 years. 

What’s the right home insurance deductible?

The homeowners insurance deductible that’s right for you depends on your financial situation.

“Go with the highest deductible you’re comfortable with, whether that’s psychologically or monetarily,” Miller says. “And don’t think about it on a one-year basis as that tends to skew the thinking because you want to reduce your homeowner premium as much as possible over the course of your homeownership. A substantial deductible like $1,000 or $2,500 might save you $100 or even $200 to $300 or more on an annual basis, and after five years, you’ve put a dent in that homeowner premium.”

Here are some scenarios to help you figure out which deductible to choose:

• You have a lot of savings. If you have a savings account that can more than handle a higher deductible, there's no reason not to keep those insurance premiums in your pocket.
• You have little to no savings. If your savings account would be decimated by a financial emergency, you are probably better off with a lower deductible.
• You're financially stable but that could change soon. If you're doing ok financially but there are changes in the near-future that will affect that, such as the end of child support payments or retirement, consider a lower deductible. You don't want to forget to change it and realize too late that you can't afford it anymore.

Shopping around can provide the real savings

Insurance companies can dazzle you with apparently generous savings for deductibles. But, just as with all discounts, those savings may not be as attractive as they first seem.

The only way you can be sure you're getting the best deal is to shop around for competitive quotes every time you renew or amend your policy. Check out the best homeowners insurance companies. Know what homeowners insurance discounts to ask about and be aware of the key factors that affect homeowners insurance rates. Also, get quotes for multiple deductible levels to see what's the best deal for you.