What Is A Homeowners Insurance Deductible?

A homeowners insurance deductible is the amount of money held back by an insurance company when paying on a customer claim.

April 02, 2020 by Dan Green

A deductible is the amount of money that an insurance company withholds when paying a homeowner’s insurance claim.

Deductibles exist 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.”

The size of a deductible is chosen by the homeowner.

The most common deductible sizes for homeowners insurance are $250, $500, and $1,000. As your deductible size increases, your annual homeowners insurance policy costs decrease.

Here’s a real-life example of how deductibles work.

Imagine a storm causes damage to your home; a falling tree crashing through your roof. You call a roofing repair company to come out to the house and it assesses the damage for you. The repair estimate is for $1,000.

So, 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, read this article on choosing the best deductible for your budget.

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