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What Is A Typical Deductible For Homeowners Insurance

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Understanding Your Homeowners Deductible

Although everyone needs it, buying homeowners insurance can be intimidating. There’s a lot to learn, including how premiums work, what a home insurance deductible is, and how to grab discounts on homeowners insurance. Here, we’ll break things down in a comprehensive way, explain how a deductible for homeowners insurance works, and help demystify homeowners insurance.

A homeowners insurance deductible is the amount a person agrees to pay for any claim. For example, if a homeowner opts for a $1,000 deductible, that means they are responsible for paying the first $1,000 when a claim is filed.

Let’s say a tree falls on a house, causing $11,000 worth of property damage. The homeowner would pay $1,000 for repairs, and their insurance company would cover the remaining $10,000.

Now imagine that it is a few months later, a storm comes through, and part of the owner’s roof is blown away. Because the deductible applies to each claim separately, they need to cover the deductible again. This means they will pay $1,000 for the roof repair and the insurance company picks up the rest.

Are Garage Doors Covered Under Homeowners Insurance?

As described above, a flat homeowners insurance deductible is a fixed dollar amount that homeowners are expected to pay for a covered claim. Once you decide how much you want your deductible to be, this is the flat amount you will pay for each claim.

As the name suggests, a percentage deductible is based on a percentage of a home’s insured value. Let’s say a home is insured for $200,000 and the deductible is 2%. That means the policyholder is responsible for the first $4,000 of a claim ($200,000 x .02 = $4,000).

Some insurance companies offer a hybrid of sorts. A dollar amount applies to “ordinary” claims, but a percentage deductible is used when making pre-specific claims. For example, an insurance policy may have a $1,000 homeowners insurance deductible for everyday events (like theft or roof repair), but require homeowners to pay a percentage deductible for claims due to an earthquake or hurricane. Each insurer has its own list of which claims trigger the percentage deductible. These are sometimes referred to as “disaster deductibles.”

Disaster deductibles are required for predictable “big dollar” claims. For example, insurers expect there to be claims for hurricanes in parts of the Southeast, and they expect those claims to be expensive. For this reason, homeowners living in hurricane-prone areas may be required to pay a percentage of hurricane-related claims. Here are some of the most common disaster deductibles, including more about hurricane deductibles:

Understanding Home Insurance

Let’s say a home suffers hurricane damage and the homeowner’s deductible is 2%. Because the homeowner’s insurance deductible applies to the total value of the home, how much they end up paying depends on how much the home is worth.

For example, if the house has a value of $300,000, a homeowner with a 2% deductible would pay the first $6,000 in repairs ($300,000 x .02 = $6,000), and the insurer would choose the rest. Of course, if the homeowner opted for a higher deductible in exchange for lower policy costs, their out-of-pocket expense would be more.

Just as some coastal areas experience hurricanes, some Midwest areas are prone to tornadoes, hail and strong winds. Homeowners insurance deductibles for wind and hail typically range from 1% to 5% of a home’s value.

Not only do flood deductibles vary by insurance company, but they also vary by state. Additionally, homeowners may be able to purchase flood insurance with a flat or percentage deductible.

Homeowner’s Insurance: Ask The Right Questions, Get The Right Coverage

Earthquake deductibles range from 2% to 20% of replacement value, depending on where you live and how prone that area is to earthquakes.

For anyone wondering, “What is the standard deductible for homeowners insurance?” A typical homeowners insurance deductible ranges from $500 to $2,000, although the average homeowners insurance deductible is $500. The low deductible means that homeowners pay more for their annual premium, but have peace of mind knowing that they only have to come up with $500 in the event of a covered claim.

Only you know how much you can afford to pay out of pocket. Live from paycheck to paycheck and don’t have money put away in an emergency savings account. In this case, you’ll likely want to keep your deductibles low, even if it means paying a higher policy premium. This is because the contractors who work on homes after a claim have a right to hold the owner responsible for their share of the bill and can go so far as to sue or place a lien on the property until paid.

Here’s how premiums work: The higher the deductible, the lower the premium. Conversely, the lower the deductible, the higher the premium. The trick is to imagine the worst-case scenario, determine how much money you can reasonably expect to come up with in an emergency, and base the deductible on that.

The Deductible Debate: How Much Should You Pay Upfront For A Claim?

There are some situations under which an insurance company will waive the deductible, allowing homeowners to have their claim without forking out any money. What can be confusing about deductible waivers is that they vary so dramatically by insurer. Here are three of the most common deductible waivers:

Some insurance companies offer to waive a deductible once a claim hits a certain threshold. For example, it may be that the deductible is waived once a claim hits $10,000 or $15,000. Large loss waivers can save homeowners big and are worth checking on when comparing insurers.

Insurers may also offer a disappearing deductible. Here’s how it works: Let’s say a “set” deductible is $1,000. But an insurer lowers the deductible amount by 20% every year. In this case, the homeowner would have no deductible after five claim-free years. So in addition to discounts on homeowners insurance, bundling can help homeowners save big when it comes time to pay a deductible.

Other insurers reward customers who carry more than one type of insurance with them by waiving their deductible. For example, if someone has homeowners, auto, and life insurance all with the same insurer, they may waive the deductible the first time a claim is filed.

What To Consider When Choosing My Home Insurance Deductible

What is the standard for homeowners insurance? It is the amount that is right for you. Not only should a homeowner choose enough coverage to make their home as good as new in the event of property damage or theft, but they should choose a deductible that is easy to pay.

Much of your time and money goes into your home. Understanding how homeowners insurance works is the first step to protecting your investment.

Donna George holds a BA in Management and Organization Development from Spring Arbor University. For more than 25 years, she has written and reported on business and finance, and she is still passionate about her work. Donna and her husband recently moved to Champaign, Illinois, home of the Fighting Illini. And although she finds the color orange unflattering on most people, she thinks they will enjoy champagne tremendously.

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Choosing The Best Homeowner's Insurance

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Homeowners insurance typically pays to repair or replace your home in many cases if it is damaged by a fire, crime or another unexpected event.

In Depth Insurance News & Research

The price you will pay for your policy can vary significantly based on a number of factors, including where you live. This article covers what the reasons are,

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