If you own a home, homeowner’s insurance provides invaluable financial protection and peace of mind.
One of the first decisions you have to make when selecting your home insurance coverage is what you want your deductible to be. Your decision between high and low deductibles plays a key role in your home insurance coverage and costs, so it’s essential to consider your options carefully.
This guide is designed to help you choose the right home insurance deductibles for your needs. Discover the differences between high and low deductibles, how they impact your premiums and out-of-pocket expenses, and who might benefit from each option. Plus, explore some tips for comparing quotes.
What Is a Home Insurance Deductible?
A deductible in home insurance is the amount of money you have to pay out of pocket when your insurance company covers a claim. There are generally two types of home insurance deductibles:
- Fixed deductible: A fixed deductible is a flat or fixed dollar amount that you need to pay out of pocket toward damage covered by your home insurance policy.
- Percentage-Based deductible: A percentage deductible is calculated as a percentage of your home’s insured value (such as 1% or 2%).
For example, say you sustain significant damage to your home, and that damage is covered by your insurance. You file a claim with your insurance company and pay your deductible, as specified in your insurance agreement. Your insurance company will then cover the remaining costs of the damage, up to your coverage limits.
Pros and Cons of High vs. Low Deductibles
| Low Deductible | High Deductible | |
|---|---|---|
| Premiums | Higher premiums | Lower premiums |
| Out-of-pocket costs for claims | Lower out-of-pocket costs | Higher out-of-pocket costs |
| Risk level | Lower risk | Higher risk |
Keep in mind that it’s only worth filing an insurance claim if the cost to repair or replace your home is less than your deductible. Otherwise, even if your insurance company covers the claim, you’ll still end up paying the whole amount out of pocket. If you choose a higher deductible, that may deter you from filing smaller claims.
Typically, low deductibles appeal to risk-averse homeowners because they know they won’t have to pay as much out of pocket if a covered event occurs. The trade-off is that they pay higher premiums.
Who Should Choose Which Deductible?
There’s no right or wrong answer when choosing your house insurance deductible. Depending on your situation, different deductible options might make more sense.
High Deductible
High deductibles are best for those with strong emergency savings so they can cover the higher out-of-pocket costs if they need to make a claim. This option is also preferable if you expect claims against your homeowners policy to be infrequent.
Because higher deductibles pair with lower home insurance premiums, this can be a way to keep your overall homeowners insurance costs lower, as long as you have infrequent claims.
Low Deductible
On the flip side, a lower deductible is a better fit for those with a tight cash flow. Choose a deductible amount that you could reliably pay if an unexpected emergency occurred, and no higher. If you have a recent history of claims, you’re also probably better off with a low deductible so you don’t pay too much out of pocket if more claims arise. Those in a high-risk area who are likely to make claims more often may opt for a low homeowners insurance deductible.
How To Choose the Right Deductible for Your Situation
When you’re trying to choose your deductible in home insurance, consider these key factors:
- How much of a financial cushion you have
- Your recent claim history
- Where your home is located and how likely damage is
- The typical cost of repairs in your area
- Your home’s age and value
These points should help you understand how likely you are to need to file a claim, how much that claim might be worth, and how much you could afford to pay out of pocket. From there, you can choose a deductible that fits your budget and aligns with your preferred risk level.
One helpful tip is to simulate one or two common claims that could occur with your home. Estimate how much they would cost, and see whether a high or low deductible would be better for your hypothetical budget.
It’s also essential to understand what home insurance covers and what it does not. When you’re selecting a deductible, only factor in the risk of covered damages, as you’ll have to pay for uncovered damages entirely out of pocket.
Get Customized Home Insurance Quotes Today
Part of what makes selecting home insurance frustrating is that it’s challenging to know all the options available. Many people search around for home insurance companies in their area and request quotes from some of their top contenders. This approach is time-consuming, though, and it may not give you a comprehensive view of your choices.
EverQuote changes things. With a few clicks, you can get customized home insurance quotes in just minutes. You’ll see options tailored to your location and home profile, so it’s easy to choose the home insurance plan that works best for you. The quotes will also reflect your selected deductible amount, and you can adjust it to see how your premiums change.
Find affordable homeowners insurance coverage with free customized quotes from EverQuote today.