How much will raising my deductible save me?

How much does increasing deductibles affect premiums?

Our rate analysis shows homeowners can trim an average of $512 off their annual rate by jumping to a $2,500 deductible from $500. 

How much you will save by increasing your deductible depends on the insurance company, where you live and the amount of the deductible you choose. Since not all insurance companies offer the same deductible options, you may not have the option for the same savings to out-of-pocket claim costs with every company.

The table below provides average rates by state for various deductibles based on a policy with $300,000 in dwelling coverage and $100,000 in liability, up to a $5,000 deductible for home insurance, which generally results in the lowest rates.

What is a good deductible for home insurance?

The average homeowners insurance deductible, according to insurers like Liberty Mutual and American Family, is $1,000, but there are plenty of options. Is it better to have a high or low deductible for home insurance? That depends.

If you choose a high deductible amount, you can reduce the amount you pay for coverage. In other words, you can reduce your annual premium.

The downside of having a high deductible is that if you file a claim, you will have to pay that high deductible out of pocket. Before you choose a deductible, it is important to ensure you will have that amount of cash on hand should you need to file a claim. If you can't afford the deductible, you'll have a problem if you file a claim.

Still, there's a case to be made for choosing a high deductible to save money. Deductibles are paid only when you file a claim, and the average homeowner makes a claim only once every 10 years, says insurance agent David Shaffer, who has researched insurance company underwriters' studies. Put some money aside over those years in case you need to pay the deductible in the future.

Why does having a higher deductible lower your insurance premiums?

When you choose a higher deductible, you take on more of the financial responsibility in a claim.

Insurance companies also know you'll file fewer claims if you have a high deductible. If your house sustains $3,000 worth of damage, you're not likely to file a claim if your deductible is $2,500. If your deductible is $500, there's a greater chance you'll file a claim to get the balance paid by your insurer.

Shaffer, an independent agent in Walnut Creek, California who helped establish the insurance consumer advocacy group United Policyholders, recommends selecting the highest deductible you can afford. The reason is that most home insurance companies will increase your rates after you file a claim. If you file more than one or two claims in a 10-year period, your premiums are likely to jump, and if you file two in a three-year period they will increase significantly. In some cases, if you file more than one claim under your policy's term, the insurance company will not renew your policy.

For more details on how to choose the right deductible for your particular situation, read our guide to selecting home insurance deductibles. Additionally, you can compare rates by ZIP code for various coverage levels by using our average home insurance rate tool.

How does the home insurance deductible impact a claim?

The deductible you have chosen is your portion of the repair cost when you file a claim. It's the amount the insurance company will deduct from the settlement once it has determined how much it will pay for repairs.

Having a higher deductible raises the minimum limit for filing a claim. Since you won't get a settlement for anything at or under the deductible, you won't file those smaller claims. For example, if you have a $5,000 deductible on your home insurance, you can't file a claim for anything under that, as there would be no payout. Insurers only pay claims that are over the deductible.

"My message is that consumers need to proactively prevent small losses from happening since they are going to cover them if they do occur, pocket the savings over all of the years they will own a home, and truly view one's home insurance policy as a consumer product to cover major losses," Shaffer says.

Some insurance companies only allow deductibles up to $1,000. In those cases, he recommends shopping for a home insurance policy from a company that allows much higher deductibles.

Methodology

Insurance.com commissioned Quadrant Information Services to field home insurance rates from up to 147 companies in all states, including Washington, D.C. Rates were fielded in late 2023 for deductibles ranging from $500 to $5,000 based on a policy with $300,000 in dwelling coverage and $100,000 liability.

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