How much does raising your deductible impact home insurance premiums?

By: Jane Switzer on April 9, 2026

QUICK TAKEAWAYS:

An insurance deductible is the amount you pay out of pocket before insurance covers a claim. It applies across home, auto, tenant, and other types of insurance coverage.
Raising your home insurance deductible can lower monthly premiums, with increases of $500 often saving around 5%, depending on your insurer.
A deductible is subtracted from your claim payout after approval—if the claim amount is less than your deductible, filing a claim isn’t worth it.
The best deductible depends on your budget, risk tolerance, and ability to pay upfront during an emergency, balancing short-term savings with long-term financial protection.

Updated: April 2026

Disaster struck, but your insurance claim was approved—you can breathe a sigh of relief.

But that doesn’t mean you’re totally home free. Before paying out your claim, your insurance company will subtract the deductible from the total amount.

A policy's deductible determines how much of your own money you must pay toward a claim before insurance covers the rest. Your deductible also affects how much you pay in monthly premiums. Increasing your deductible by $500 can save you around 5% on your premium, but specifics differ from insurer to insurer. Before choosing the deductible for your policy, it’s important to understand how a deductible works, when it applies, and what you can afford.

What is an insurance deductible?

An insurance deductible is the amount of money you’re responsible for paying out of pocket before your insurance kicks in to cover an approved claim.

Deductibles are common across various types of insurance including home, tenant, auto, health, or business. They can be a fixed dollar amount or, in the case of home insurance, a percentage of your home’s insured value.

Let’s say you file a claim for $5,000, and your policy has a $1,000 deductible. You would pay the first $1,000, and your insurance company would cover the remaining $4,000.

Why do deductibles exist? Deductibles are designed to share the financial responsibility between you and your insurer. They also discourage frequent small claims and help prevent fraudulent claims, keeping insurance costs more manageable for everyone.

How much can raising your deductible lower your home insurance premiums?

In general, choosing a higher deductible means you’ll pay lower home insurance premiums. However, how much you pay in home insurance premiums also depends on factors like where you live, the specifics of your home (age, size, general condition, etc.), the type of coverage you choose, your credit score, and your claims history.

“How much you can save by increasing your deductible depends on your insurance provider,” says Stéphane McGee, assistant vice president at Definity Insurance. Increasing your deductible by $500 can save you around 5% on your premium, he says.

But raising your deductible has a few risks, such as raising it beyond the point you can afford to pay up front if you need to make a claim.

“Raising your deductible means that you’ll have to pay more out of pocket before your insurance kicks in to cover your loss,” says McGee. “If you’re looking to save money in the short term, chances are you won’t want to pay the extra cash to cover your higher deductible if you need to make a claim. And since there’s no way to predict when you may need to make a claim, there’s always a risk involved.”

When does your deductible kick in when you make a claim?

If your claim is approved, you don’t pay your deductible directly to the insurance company. Instead, they subtract the deductible amount from your total claim payout. For example, if your claim is approved for $2,000 and your deductible is $500, the insurance company will pay you $1,500.

Not every claim is worth filing. If the cost of the damage is less than your deductible, it’s not worth making a claim. For instance, if your claim is approved for $750 but your deductible is $1,000, you won’t receive a payout. Plus, filing a claim could lead to higher premiums in the future, so it’s important to weigh the costs before submitting one.

Deductibles typically apply to claims for your main dwelling, detached structures, personal property, additional living expenses, and certain endorsements. However, you usually don’t pay a deductible on personal liability claims. For example, if someone is injured on your property, or if you accidentally damage someone else’s property, your liability coverage may kick in without requiring a deductible.

How to set the best deductible for your situation

When you apply for an insurance policy, the insurance provider will typically let you choose a deductible between a specified minimum and maximum amount, usually between $500 and $5,000.

McGee says the deductible amount you choose should always be based on your own comfort level and budget. When setting your deductible, think about how much you could realistically afford to pay upfront in the event of an emergency, while balancing how much you can afford to pay in monthly premiums.

“What you choose really depends on your risk tolerance – if you’re comfortable paying a higher deductible upon submitting a claim, you can save on your monthly premium,” says McGee. “But if you have a lower risk tolerance and want extra peace of mind that you won’t have to dig as deep into your pocket if something unexpected happens, then a lower deductible is a better choice.”

Contact your insurance provider directly to find out how much raising or lowering your deductible will affect your premiums.

“Once you speak to your provider to understand how much you can save by increasing your deductible by a certain amount, compare the cost savings on your premium to see if the savings will be worth it,” says McGee.

In addition to, or instead of, raising your deductible to save money on insurance, you can avoid paying more in monthly payments by simply comparing home insurance providers for the best rate. That way, you’ll be able to reap more savings from the get-go without compromising on the quality of your insurance.

Frequently asked questions (FAQ)

1. What does an insurance deductible mean in simple terms?

An insurance deductible is the amount of money you must pay out of pocket before your insurance company pays the rest of an approved claim. For example, if your deductible is $1,000 and your claim is $5,000, you pay the first $1,000 and your insurer covers the remaining $4,000.

2. Is it better to have a higher or lower home insurance deductible?

A higher deductible usually lowers your monthly home insurance premiums, but it also means you’ll pay more upfront if you make a claim. A lower deductible costs more in premiums but reduces your out‑of‑pocket expense during a loss. The best choice depends on your budget, risk tolerance, and ability to cover the deductible in an emergency.

3. Do you always have to pay a deductible when you file an insurance claim?

No. If the cost of damage is less than your deductible, your insurance company won’t issue a payout, making the claim not worth filing. In addition, most policies do not require a deductible for personal liability claims, such as when someone is injured on your property or you damage someone else’s property.