When you buy a house, you’ll be required to purchase homeowners insurance. That’s because your mortgage lender wants to be sure their interest in your property is protected in case of a crisis. But what you pay for homeowners insurance depends on several factors, including your deductible.

A homeowners insurance deductible is the amount you’ll pay out of pocket if you file an approved claim. Typically, you’ll get to decide what the deductible will be, but it’s important to your wallet that you have a solid grasp on the relationship between homeowners insurance deductibles and premiums.

We’ll cover everything you need to know about your homeowners insurance deductible.

Key Takeaways

  • The average homeowners’ insurance deductible is $500.
  • Because insurance companies take the brunt of the risk when you file a claim, homeowners with low deductibles pay the highest insurance premiums.
  • Homeowners who live in areas at risk for natural disasters tend to pay higher deductibles if they need to file a claim.
  • The higher the deductible, the lower the premium. The lower the deductible, the higher the premium.

What is a home insurance deductible?

A deductible for homeowners insurance is the amount the policyholder will pay if there is an approved claim. It is agreed upon between you, the policyholder and the insurance company at the time the policy is established.

Setting your deductible depends on several things:

  • How much you can afford to pay in monthly or annual insurance premium payments
  • How much you can afford to pay out of pocket if something bad happens to your home

How does a homeowners insurance deductible work?

“With most home insurance policies, your premium/cost will decrease as your deductible increases,” says Michael Cohen, the President and Founder of Bering Insurance Partners based in Metro Atlanta.

“You may only see a small difference in cost if going from, say, a $1,000 deductible to a $1,500 deductible. The difference would be more dramatic going from a $1,000 deductible to a $5,000 deductible.

Here’s how it works. Let’s say you have a $1,000 deductible on your homeowner’s insurance policy. During a thunderstorm, a large tree limb falls on your roof, amounting to a homeowner’s insurance claim of $8,000 to get your roof replaced. Since your deductible is $1,000, you pay the roofing company $1,000 out-of-pocket before your insurance company covers the remaining $7,000.

Home, condo, renters, and mobile home insurance

Because insurance company’s take the brunt of the risk when you file a claim, homeowners or renters with low deductibles pay the highest insurance premiums. Earl Jones, the owner of Earl L. Jones Insurance Agency, says, “If you pay a deductible of $2500 – $5000 on your home, condo, or mobile home insurance, you might be able to save 10%-20% on your premium.

“If you bundle your home and auto insurance, you can save even more. With renters insurance, if you pay out a deductible of $1000, you might save between 5% and 15%, before bundling other insurance products.”

What are the different types of homeowners insurance deductibles?

“There are several different types of deductibles, and you may even have different deductibles for different types of claims,” says Cohen.

Fixed dollar amount deductible

With a dollar amount deductible, you pay a fixed dollar amount before your insurer covers the rest of the claim. It might be $1,000, $2,500, or any other amount you’ve agreed on with your insurance company when the policy was created. This is typical of standard homeowners insurance policies.

Percentage deductible

A percentage deductible is calculated as a percentage of your homeowner’s insurance coverage. “For instance, if your home insurance policy includes a dwelling coverage limit of $100,000 and you have a 1% deductible, then it would be $1,000, Cohen explains, “In the same scenario, if you have a 2% deductible, it would be $2,000. You can also have different deductibles (either dollar amount or percentage) based on the cause of loss.”

Percentages are common in disaster deductibles like earthquake insurance or wind/hail insurance policies.

What is the average home insurance deductible?

Typical homeowners deductibles can range from $500 up to $2,000. As of this past April 2021, the standard homeowners’ insurance deductible is $500.

That means that homeowners are paying higher premiums overall. But in the case of a covered disaster, they are only out the upfront cost of $500.

How do home insurance deductibles affect the cost of insurance premiums?

What you pay in homeowners insurance premiums is directly linked to your deductible, or the amount of money you pay out before your insurance kicks in and pays the balance of a qualified claim. The payment you receive from your insurance company covers the total amount of the claim minus your deductible. Generally, the higher the insurance premium, the lower your deductible will be.

For example: Let’s say you live in Albany, New York and pay the average homeowners’ insurance deductible of $500 and your average annual premium might be around $1,500, or a monthly premium of $125.

On the other hand, if your deductible is $2,500, your annual premium will be about $1,100, or a monthly premium of $92.

Seth Lytton, Chief Operating Officer at The Detroit Bureau, explains, “Higher insurance deductibles mean lower insurance premiums and vice versa. If you’re trying to save money upfront and can fix much of the damage to your house yourself, stick with a higher deductible.”

Typical homeowners insurance deductibles and the average cost of home insurance by company

This table illustrates how different deductibles homeowners insurance premiums in various locations. The coverage level is $300,000 for property and $100,000 for liability.

State and Capital Insurance Company $500 $1,000 $1,500 $2,000 $2,500 Savings from $500 to $2500 deductible
Sacramento, California Allstate $1,169 $997 $997 $825 $825 $344 or 42%
Sacramento, California Fire Insurance Exchange $2,210 $2,035 $1,859 $1,618 $1,618 $592 or 37%
Sacramento, California Liberty Mutual $1,817 $1,622 $1,622 $1,426 $1,426 $391 or 27%
Sacramento, California Mercury $679 $575 $575 $471 $471 $208 or 44%
Sacramento, California State Farm $1,150 $1,150 $1,063 $1,024 $976 $174 or 18%
Sacramento, California Travelers $858 $771 $728 $618 $618 $240 or 39%
Montgomery, Alabama Alfa Mutual Insurance $2,562 $2,246 $2,020 $1,972 $1,972 $590 or 30%
Montgomery, Alabama Allstate $3,651 $3,016 $2,991 $2,976 $3,001 $650 or 22%
Montgomery, Alabama Foremost Insurance $2,198 $2,108 $2,108 $2,018 $2,018 $180 or 9%
Montgomery, Alabama Liberty Mutual $3,538 $3,120 $3,120 $3,076 $3,076 $462 or 15%
Montgomery, Alabama State Farm $2,747 $2,747 $2,459 $2,459 $2,281 $466 or 20%
Montgomery, Alabama Travelers $1,858 $1,829 $1,807 $1,775 $1,775 $83 or 5%
Montgomery, Alabama United Service Automobile $1,314 $1,275 $1,214 $1,214 $1,214 $100 or 8%
Albany, New York Allstate $1,509 $1,305 $1,209 $1,209 $1,140 $369 or 32%
Albany, New York Liberty Mutual $2,013 $1,685 $1,685 $1,574 $1,574 $439 or 28%
Albany, New York New York Central Mutual $769 $670 $637 $597 $597 $172 or 29%
Albany, New York State Farm $942 $851 $778 $762 $739 $203 or 27%
Albany, New York Travco Insurance $1,148 $1,021 $1,021 $883 $883 $265 or 30%
Denver, Colorado Allstate $3,413 $3,132 $2,900 $2,703 $2,408 $1,005 or 42%
Denver, Colorado American Family $2,101 $1,892 $1,808 $1,723 $1,682 $419 or 25%
Denver, Colorado Farmers Insurance $3,782 $3,455 $2,926 $1,287 $2,575 $1,207 or 47%
Denver, Colorado Safeco $1,839 $1,764 $1,712 $1,663 $1,617 $222 or 14%
Denver, Colorado State Farm $1,982 $1,982 $1,982 $1,982 $1,982 $0
Denver, Colorado Travelers $2,518 $2,353 $2,251 $2,066 $2,066 $452 or 22%
Denver, Colorado USAA $2,199 $1,898 $1,419 $1,419 $1,419 $780 or 55%
Topeka, Kansas Allstate $2,743 $2,524 $2,348 $2,081 $2,081 $662 or 32%
Topeka, Kansas American Family $2,715 $2,382 $2,239 $2,096 $1,954 $761 or 39%
Topeka, Kansas Farm Bureau $2,845 $2,180 $2,050 $1,904 $1,769 $1,076 or 61%
Topeka, Kansas Farmers Insurance $2,501 $2,292 $2,116 $1,849 $1,737 $764 or 44%
Topeka, Kansas Safeco $2,090 $2,017 $1,965 $1,917 $1,873 $217 or 12%
Topeka, Kansas State Farm $2,261 $2,261 $2,261 $2,056 $2,056 $205 or 10%
Topeka, Kansas Travelers $4,630 $4,366 $3,776 $3,466 $3,466 $1,164 or 34%
Columbus, Ohio Allstate $1,011 $954 $878 $849 $838 $173 or 21%
Columbus, Ohio American Family $1,345 $1,259 $1,221 $1,183 $1,145 $200 or 17%
Columbus, Ohio Cincinnati Insurance $916 $871 $844 $817 $789 $127 or 16%
Columbus, Ohio Erie Insurance $1,122 $985 $870 $700 $700 $422 or 60%
Columbus, Ohio Farmers $1,067 $982 $877 $791 $791 $276 or 35%
Columbus, Ohio Liberty Mutual $1,428 $1,130 $1,130 $1,045 $1,045 $383 or 37%
Columbus, Ohio Nationwide $1,349 $1,162 $1,088 $1,006 $1,006 $343 or 34%
Columbus, Ohio State Farm $1,857 $1,857 $1,658 $1,658 $1,536 $321 or 21%
Columbus, Ohio Travelers $1,258 $1,026 $1,026 $945 $945 $313 or 33%
Richmond, Virginia Erie Insurance $2,284 $2,039 $2,019 $1,994 $1,974 $310 or 16%
Richmond, Virginia Farmers Insurance $1,201 $1,073 $964 $871 $795 $406 or 51%
Richmond, Virginia Liberty Insurance $2,304 $2,112 $2,112 $1,878 $1,878 $426 or 23%
Richmond, Virginia Nationwide $1,448 $1,075 $1,075 $962 $962 $486 or 51%
Richmond, Virginia State Farm $1,551 $1,392 $1,519 $1,307 $1,307 $244 or 19%
Richmond, Virginia Travco $1,449 $1,449 $1,325 $1,302 $1,212 $237 or 20%
Richmond, Virginia USAA $1,051 $979 $929 $857 $857 $194 or 23%
Richmond, Virginia Allstate $1,010 $968 $889 $889 $889 $121 or 14%
Tallahassee, Florida Castle Key Insurance $1,122 $1,051 $1,051 $1,051 $1,051 $71 or 7%
Tallahassee, Florida Florida Peninsula Insurance $1,654 $1,512 $1,512 $1,406 $1,406 $248 or 18%
Tallahassee, Florida State Farm $2,640 $2,261 $1,882 $1,882 $1,715 $925 or 54%
Tallahassee, Florida First Floridian $1,372 $1,325 $1,325 $1,220 $1,220 $152 or 12%
Tallahassee, Florida United $1,833 $1,654 $1,654 $1,410 $1,410 $423 or 30%
Tallahassee, Florida Universal $2,085 $1,865 $1,865 $1,700 $1,700 $385 or 23%
Tallahassee, Florida USAA $2,144 $2,044 $1,965 $1,965 $1,965 $179 or 9%
Austin, Texas Allstate $2,563 $2,345 $2,229 $2,229 $2,024 $539 or 27%
Austin, Texas Safeco $908 $866 $836 $808 $782 $126 or 16%
Austin, Texas Texas Farmers $1,486 $1,453 $1,425 $1,405 $1,091 $395 or 36%
Austin, Texas Travelers $1,122 $1,031 $966 $871 $871 $251 or 29%
Austin, Texas USAA $1,279 $1,231 $1,149 $1,149 $1,149 $130 or 11%
Concord, New Hampshire Concord General $841 $587 $466 $435 $541 $300 or 55%
Concord, New Hampshire Liberty Mutual $785 $700 $661 $589 $589 $196 or 33%
Concord, New Hampshire State Farm $1,054 $796 $796 $531 $531 $523 or 98%
Concord, New Hampshire Travelers $1,833 $1,561 $1,561 $1,357 $1,357 $476 or 35%
Concord, New Hampshire Vermont Mutual $1,269 $1,269 $1,150 $1,125 $1,125 $144 or 13%
Concord, New Hampshire Allstate $750 $721 $698 $660 $660 $90 or 14%
Concord, New Hampshire Amica $816 $679 $679 $644 $644 $172 or 27%
Olympia, Washington Allstate $684 $647 $617 $592 $555 $129 or 23%
Olympia, Washington American Family $832 $737 $700 $664 $635 $197 or 31%
Olympia, Washington Farmers $1,194 $1,133 $1,133 $976 $976 $218 or 22%
Olympia, Washington Pemco $788 $674 $638 $569 $569 $219 or 38%
Olympia, Washington Safeco $791 $736 $736 $667 $667 $124 or 19%
Olympia, Washington State Farm $1,186 $1,186 $1,034 $1,034 $958 $228 or 24%
Olympia, Washington Travelers $732 $693 $662 $613 $613 $119 or 19%
Olympia, Washington USAA $766 $710 $609 $609 $609 $157 or 26%

What homeowners insurance deductible should you choose?

The homeowners insurance deductible is one of two costs you’ll agree to when you sign a homeowners insurance policy. The other cost you’ll agree to is the premium. Those two costs are directly inversely related, meaning the higher the deductible you agree to pay, the lower your premium will be.

While a low homeowners insurance premium may be better in the long run, can you reasonably afford to pay a higher insurance deductible upfront if you need to file a claim? Or, would it be easier to pay a higher annual or monthly premium to have fewer out-of-pocket costs for a covered loss? You’ll also want to consider adding a disaster deductible on top of your primary deductible if you live in an area high in natural disasters.

If you’re not sure where to get started or which homeowners insurance company can offer you the most bang for your buck, check out the Best Home Insurance Companies for 2021.