In this guide
A home insurance deductible is the amount you pay out of pocket on a covered claim before your insurer pays the rest. Most policies have a flat-dollar deductible for ordinary losses, but many also have a separate percentage deductible for wind, hail or hurricane damage. A higher deductible usually lowers your premium, but it means you pay more if you have a claim.
Key takeaways
- The deductible is subtracted from a covered loss. It's not paid to the insurer up front.
- A flat-dollar deductible is a set amount. A percentage deductible is a share of your dwelling coverage limit.
- Wind, hail and hurricane deductibles are often percentages, commonly 1% to 5% for wind and hail according to Triple-I, and sometimes higher in coastal areas.
- Claims smaller than your deductible usually produce no payment.
- Choose a deductible you could afford to pay from savings at short notice.
How a home insurance deductible works
When a covered loss happens, the insurer calculates the amount of the loss, applies any limits, and subtracts your deductible. What's left is the payment. Using round numbers just to illustrate: if a covered storm causes $9,000 in damage and your deductible is $1,000, the insurer pays up to $8,000, and you cover the first $1,000.
If the damage is $800 and your deductible is $1,000, there is typically nothing to pay, since the loss is below the deductible. That's why many people think carefully before filing small claims. How filing affects your premium varies by insurer and state, and is outside what this article can answer.
A deductible generally applies per claim, or per occurrence, not per year. That differs from health insurance, where deductibles reset annually. A second storm later in the year would typically bring a new deductible.
Flat-dollar vs. percentage deductibles
| Flat-dollar deductible | Percentage deductible | |
|---|---|---|
| How it's set | A fixed amount, such as $1,000 or $2,500 | A percentage of your dwelling coverage (Coverage A) limit |
| Typical use | Most "all other perils" losses, such as fire, theft or water damage | Wind, hail, hurricane and in some areas other catastrophe losses |
| Changes with your limit? | No | Yes. A higher limit means a higher dollar deductible |
| Example (limit of $300,000) | $1,000 is $1,000 | 2% is $6,000, and 5% is $15,000 |
The Insurance Information Institute (Triple-I) gives a similar example: on a house insured for $300,000 with a 5 percent deductible, the first $15,000 of a claim comes out of the homeowner's pocket.
Watch out: If you raise your dwelling limit to match rebuild costs, a percentage deductible rises with it. Check the dollar amount on your declarations page, not just the percentage.
Wind, hail and hurricane deductibles
In regions with frequent severe weather, insurers often use special deductibles. Triple-I says wind and hail deductibles are most commonly percentages, typically from 1 percent to 5 percent, and are common in places with severe windstorms and hail. It also distinguishes hurricane deductibles, which apply only to hurricane damage, from windstorm or wind/hail deductibles, which apply to any wind damage.
Hurricane deductibles can be higher. Triple-I and the NAIC describe percentages that can range from 1 percent to as high as 15 percent for windstorm losses in some coastal areas, though sources differ on the top of the range and rules depend on the state. Some states set limits on percentage deductibles or require insurers to offer options. Check yours.
When the deductible is triggered can also vary. Some policies apply it only when a hurricane has been officially declared, or when a named storm is in effect. Read the "windstorm or hail" and "hurricane" wording in your policy. Our guide to hurricane and windstorm deductibles goes deeper, and roof damage coverage covers one common claim that triggers it.
Other deductibles you might see
- Earthquake: if you buy earthquake coverage, it usually has its own deductible, often a percentage. See earthquake insurance.
- Flood: flood policies, including those from the National Flood Insurance Program, have their own deductibles, separate from homeowners.
- Wildfire or other catastrophe: some insurers in high-risk areas use special terms. See wildfire risk and home insurance.
- Liability: personal liability coverage typically has no deductible.
How to choose a deductible
This isn't personal advice, but these questions help:
- Could I pay it quickly? A deductible should be an amount you could find from savings. If not, a lower deductible may fit better.
- How much would I save in premium? Ask for quotes at several deductible levels. The saving varies by insurer, and may not be large for your home.
- How often might I claim? If you don't plan to file small claims, a higher deductible can make sense. But insurance is meant for large losses, and you still need to be able to afford a repair.
- Does my mortgage lender set a limit? Some lenders cap the deductible they'll accept.
- What does my area's weather suggest? If a percentage wind or hail deductible applies, work out the dollar figure for your home.
Raising your deductible is one of several ways to adjust your premium. See how to lower your home insurance premium. Savings are not guaranteed, so compare quotes from several insurers using the same coverage, with different deductible options.
Deductibles and escrow
If your mortgage has an escrow account, a higher deductible may reduce the premium that escrow collects, and a lower one may raise it. The deductible itself is not paid through escrow. You pay it when a claim arises, to the contractor or by having it subtracted from your payment. See homeowners insurance and escrow accounts.
Deductibles at claim time
A few practical points:
- The deductible is applied to the covered loss, after limits and, in some cases, after depreciation is calculated. See replacement cost vs. actual cash value.
- If damage from one event is partly covered and partly excluded, only the covered part counts.
- Don't agree to a contractor's offer to "waive" or "absorb" your deductible. In some states that may be illegal, and it can lead to claim problems. Ask your insurer or state insurance department about the rules.
- Keep records of repairs and payments. Our guide to how to file a home insurance claim explains the process.
Car policies work in a similar way, though the details differ. See how car insurance deductibles work.
Frequently asked questions
Do I pay the deductible to the insurer?
Generally no. It's subtracted from the claim payment, so you cover that amount of the repair cost yourself.
Is a higher deductible always cheaper?
It often lowers the premium, but how much depends on your insurer, home and location. It also increases what you pay when a claim occurs.
Why is my wind deductible a percentage?
Insurers use percentage deductibles in places with frequent or severe wind and hail so that policyholders share more of the cost of widespread storm losses. Your policy shows the rule that applies.
Is there one deductible per year?
Typically a deductible applies to each claim, not per year. Check your policy wording.
Can I change my deductible mid-term?
Many insurers allow changes, but some only at renewal, and rates may adjust. Ask your insurer.
Sources
- Insurance Information Institute – Understanding your insurance deductibles
- Insurance Information Institute – Background on: Hurricane and windstorm deductibles
- NAIC – Hurricane deductibles
- NAIC – Homeowners insurance
General information only. This guide explains general concepts and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy documents and speak to a licensed insurance professional or your state insurance department about your situation.