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:

  • $250
  • $500
  • $1,000

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.

Dan Green

Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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