What is a homeowners insurance deductible?

A homeowners insurance deductible is the amount you must pay when you file a claim. Your home insurance policy will not pay anything until the deductible has been met.

The deductible is usually a flat dollar amount, often ranging between $500 and $2,500. The average deductible has gone up over time.

“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,” says P.J. Miller, insurance agent at Wallace & Turner Insurance in Springfield, Ohio.

The average home insurance deductible has increased as home insurance rates have increased – many people opt for $1,000 or more to reduce rates.

You may also have a separate deductible for hurricanes or windstorms, usually set at a percentage of the dwelling coverage amount. 

Types of homeowners insurance deductibles

A deductible is the amount you pay when you file a claim, but there isn't just one type of deductible. There are two main types of deductibles, plus a third that combines them.

Flat dollar amount. This amount is set, and you will pay the same amount regardless of the claim amount. If you have a $500 deductible, that is what you pay, whether the claim is for $2,000 or $20,000. This is the most common type of deductible.

Percentage of dwelling coverage. Percentage-based is when your deductible is a percentage of your insurance policy’s dwelling coverage amount. So, if your home is insured for $200,000 and your deductible is 2%, you'd have to pay the first $4,000 of any claim (2% of $200,000 = $4,000).

Combined flat and percentage. This is a hybrid of the first two. A dollar amount applies to most claims, but certain events, such as hurricanes or earthquakes, can trigger a percentage deductible.

How does a home insurance deductible work?

A home insurance deductible is the amount a homeowner must pay toward a claim before the insurer pays its part. When the insurance company issues a settlement check, it will deduct the amount of your deductible from that settlement.

Let's look at an example:

  • You have a $500 deductible.
  • A fire causes $12,000 worth of damage.
  • You would pay $500, and the insurer would pick up the remaining $11,500.

The same homeowners insurance deductible amount (also called an all-peril deductible) applies to most property claims, like weather damage, theft, fire or burst pipes. 

When do you pay the deductible for homeowners insurance? 

You will pay the deductible once the claim has been accepted and a contractor is set to begin repairs. In most cases, you’ll pay the deductible amount to the contractor directly.

A notable exception is personal property, where the insurance company will simply deduct the deductible from your claim settlement. In this case, you don’t pay the deductible directly, you simply have to make up the difference when you buy new items.

Homeowners insurance deductibles apply to every claim, regardless of how many you make during a year. In that way, it’s similar to an auto insurance deductible. 

There are exceptions; for example, Florida allows only one deductible each hurricane season for that particular risk.

Deductibles don’t apply to personal liability or medical payments claims.

Homeowners insurance disaster deductibles

Insurers often try to protect themselves against natural disaster claims. They impose or encourage high deductibles that apply only to those exceptional risks. In some cases, these deductibles apply only if you purchase an endorsement or a separate policy.

Earthquake insurance deductibles

Earthquakes aren't covered under standard insurance policies – even if you live in areas prone to them. Instead, earthquake insurance is a separate insurance policy or an endorsement. One part of the policy is for the dwelling, and the other covers personal property. There is normally a deductible and limit assigned to each portion.

For example: 

  • If an earthquake damaged your house and you had $300,000 worth of dwelling coverage with a deductible of 20%, you would pay $60,000.
  • After deducting that amount, your insurance company will pay the remaining $240,000.
  • If your personal property limit was $50,000 with a 10% deductible and you claimed that full amount, $5,000 would be deducted from the settlement.

The California Earthquake Authority (CEA) offers coverage to California residents. A standard CEA policy in California includes a 15% deductible. However, its “Homeowners Choice” insurance policy lets you choose separate coverage for dwellings and personal property with different deductibles.

For other parts of the nation, deductibles typically range from 5% to 20% of your replacement cost of the structure covered. However, it’s typical for insurance companies in high-risk areas to insist you have a deductible of at least 10%.

Hurricane, wind and hail deductibles

The situation is generally similar for hurricane and wind/hail deductibles. Hurricane deductibles apply only to damage from hurricanes. Windstorm or wind/hail deductibles apply to wind damage.

Percentage-based deductibles typically apply to these coverages and run from 1% to 5% of the home’s insured value. Some states allow homeowners to pay a higher premium to carry a traditional dollar deductible. This is seldom allowed, though, if you live in a coastal area.

Depending on your state's law and insurer's rules, a hurricane deductible may only apply once the National Weather Service designates a tropical storm as a hurricane or reports a particular wind-speed threshold. The only way to be sure of the factor that triggers your exceptional deductible is to check your insurance policy or talk to your insurance company.

The III lists 20 states, plus the District of Columbia, that have hurricane deductibles:

  1. Alabama
  2. Connecticut
  3. Delaware
  4. District of Columbia
  5. Florida
  6. Georgia
  7. Hawaii
  8. Louisiana
  9. Maine
  10. Maryland
  11. Massachusetts
  12. Mississippi
  13. New Jersey
  14. New York
  15. North Carolina
  16. Pennsylvania
  17. Rhode Island
  18. South Carolina
  19. Texas
  20. Virginia

Flood insurance deductibles

Flooding is not covered by standard homeowners insurance. You can ask your insurance company whether it offers coverage for this additional risk or buy a flood insurance policy from the federal government's National Flood Insurance Program (NFIP). Flood deductibles under NFIP plans range from $1,000 to $10,000.

Can you avoid paying your home insurance deductible?

You can’t avoid paying your home insurance deductible, and you should be wary of anyone promising to show you how to avoid paying the home insurance deductible.

The deductible is part of the insurance contract. You agree to it when you take out the policy. If you file a claim, you have to pay the deductible.

In some cases, a contractor may offer to cover your deductible as an incentive to get your business on a repair, but that’s not avoiding the deductible, it’s someone else paying it.

What is a good deductible for home insurance?

Deciding how much your deductible for home insurance should be requires considering a few things:

  • Would you rather pay lower premiums and more out of pocket when you have a claim, or pay higher premiums in return for lower out-of-pocket costs when you file a claim?
  • How much cash do you have available to pay the deductible if you need to file a claim?
  • How likely do you think you’ll need to file a claim in the next few years?

While that last question can be hard to answer, consider weather patterns in your area. Is your area prone to hailstorms? What about tornadoes or hurricanes? If you live in a high-risk area, assume that you’ll have to pay your deductible sooner rather than later, and make sure it’s an amount you can handle.