What Is A Homeowners Insurance Deductible?
A deductible is the amount of money that an insurance company withholds when paying a homeowner’s insurance claim.
Deductibles are designed to reduce moral hazard, such as a homeowner deciding not to install smoke alarms because “insurance will pay for the damage,” or not installing a home security system because “insurance will pay for anything stolen.”
Homeowners choose the size of their insurance deductible. The three most common deductible sizes are:
When you choose a larger deductible, the cost of your homeowners insurance policy drops because your insurer pays less money for damages and claims.
Imagine a storm causes damage to your home. A falling tree crashes through your roof. You call a roofing repair company and it assesses the damage at $1,000.
You file a claim with your insurance company.
- If your deductible is $250, the insurance company sends you $750 for repairs
- If your deductible is $500, the insurance company sends you $500 for repairs
- If your deductible is $1,000, the insurance company send you nothing
Deductibles apply to all of the insurance types you might use as a homeowner: homeowners, auto, earthquake, flood, and umbrella insurance.
For help picking your deductible size, ask us your question in the chat box.