Homeowners Insurance Deductibles Explained | The Motley Fool

common types of home insurance deductibles

The most common types of homeowners insurance deductibles are fixed, percentage, and split. here’s how each works:

fixed deductible

As described above, a homeowners insurance fixed 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, that’s the fixed amount you’ll pay for each claim.

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deductible percentage

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).

split deductible

Some insurance companies offer a kind of hybrid. A dollar amount applies to “regular” claims, but a percentage deductible is used when pre-specified claims are made. For example, an insurance policy may have a $1,000 homeowners insurance deductible for everyday events (such as theft or roof repair), but require homeowners to pay a percentage of the deductible for claims due to an earthquake or hurricane. each insurer has its own list of claims that trigger the deductible percentage. these are sometimes called “disaster deductibles.”

what are disaster deductibles?

Disaster deductibles are required for predictable “big money” claims. For example, insurers expect there to be hurricane claims in parts of the Southeast, and they expect those claims to be expensive. For that reason, homeowners who live in hurricane-prone areas may be required to pay a percentage of hurricane-related claims. Here are some of the more common disaster deductibles, including more information on hurricane deductibles:


Let’s say a home is damaged by a hurricane and the homeowner’s deductible is 2%. Because the homeowner’s insurance deductible is applied to the full value of the home, how much you end up paying depends on the value of the home.

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For example, if the home is worth $300,000, a homeowner with a 2% deductible would pay the first $6,000 in repairs ($300,000 x 0.02 = $6,000) and the insurer would pay the rest. Of course, if the owner opted for a higher deductible in exchange for lower policy costs, his out-of-pocket cost would be higher.

wind and hail

Just as some coastal areas experience hurricanes, some areas of the Midwest are prone to tornadoes, hail, and high winds. Wind and hail homeowners insurance deductibles typically range from 1% to 5% of the home’s value.


Flood deductibles not only vary by insurance company, they also vary by state. Additionally, homeowners can purchase flood insurance with a fixed or percentage deductible.


earthquake deductibles range from 2% to 20% of replacement value, depending on where you live and the earthquake risk in that area.

what is the average homeowners insurance deductible?

for anyone wondering, “what is the standard deductible for homeowners insurance?” The typical homeowners insurance deductible ranges from $500 to $2,000, although the average homeowners insurance deductible is $500. The low deductible means homeowners are paying more for their annual premium, but have peace of mind knowing they only have to contribute $500 in the event of a covered claim.

how to choose the right home insurance deductible for you

Only you know how much you can afford to pay out of pocket. Suppose you live paycheck to paycheck and don’t have any money sitting in an emergency savings account. In that case, you’ll probably want to keep your deductibles low, even if it means paying a higher policy premium. That’s because contractors who work on homes after a claim have the right to hold homeowners responsible for their share of the bill and may sue or encumber the property until it’s paid.

How do homeowners insurance deductibles affect premiums?

How high (or low) your homeowners insurance deductible is directly affects your premiums.

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This is 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, figure out how much money you can reasonably expect to get in an emergency, and base your deductible on that.

get homeowners insurance deductible waived

There are some situations where an insurance company will waive the deductible, allowing homeowners to settle their claim without paying any money. What can be confusing about deductible waivers is that they vary drastically by insurer. Here are three of the most common deductible waivers:

exemption for large losses

Some insurance companies offer to waive a deductible once a claim reaches a certain threshold. for example, the deductible may be waived once a claim reaches $10,000 or $15,000. Large loss waivers can save homeowners a lot and are worth checking out when comparing insurers.

disappearance of the deductible

Insurers may also offer a deductible that disappears. Here’s how it works: Let’s say a “fixed” deductible is $1,000. however, an insurer reduces the amount of the deductible by 20% each year. in this case, the owner would have no deductible after five years with no claims. so, in addition to homeowners insurance discounts, the combination can help homeowners save big when it comes time to pay a deductible.

combined coverage exemption

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

what is the standard for homeowners insurance? is the right amount for you. Not only should the homeowner choose enough coverage to keep their home looking like new in the event of property damage or theft, but they should also choose a deductible that is easy to pay.

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

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