Insurance 1015 min read

Understanding Deductibles: How to Pick the Right Amount

By Jarrod Currey|January 22, 2025

Key Takeaways

A deductible is what you pay out of pocket before insurance kicks in
Higher deductible = lower premium, but more risk when you file a claim
Don’t pick a deductible you couldn’t actually afford to pay tomorrow
Hurricane deductibles work differently in Florida — ask about percentage-based deductibles

What Is a Deductible?

A deductible is the amount you agree to pay out of your own pocket before your insurance coverage kicks in. If you have a $1,000 deductible on your homeowners policy and a covered loss costs $8,000 to repair, you pay the first $1,000 and the insurance company covers the remaining $7,000. Every policy has a deductible. It’s one of the biggest levers you have for controlling your premium. And yet most people pick one without thinking about it. Classic.

How Deductibles Affect Your Premium

Here’s the basic trade-off: the higher your deductible, the lower your premium. The lower your deductible, the higher your premium. Why? Because when you agree to take on more of the financial risk yourself (a higher deductible), the insurance company’s risk goes down — and they pass some of that savings back to you. A $2,500 deductible will almost always come with a noticeably lower premium than a $500 deductible on the same policy. It’s simple math, but the implications aren’t always obvious.

The Question Most People Skip

Here’s what we always ask clients: “If something happened tomorrow, could you write a check for that deductible?” If the answer is no, the deductible is too high — no matter how good the premium looks. A low premium doesn’t help you if you can’t afford to use your coverage when you need it. We see this more than you’d think. Someone picks a high deductible to save money on the premium, and then a hurricane takes out their roof and they can’t come up with the deductible to file the claim. Don’t be that person.

Hurricane Deductibles: A Florida Heads-Up

In Florida, most homeowners policies have a separate hurricane deductible. This one works differently — instead of a flat dollar amount, it’s usually a percentage of your home’s insured value. So if your home is insured for $350,000 and you have a 2% hurricane deductible, you’d be responsible for the first $7,000 of any hurricane damage. That catches a lot of people off guard, especially during their first hurricane season. Some carriers offer policies with lower hurricane deductibles (like $2,500 or $5,000), which can be more predictable but come with higher premiums. This is one of the first things we check when reviewing a policy. You’d be surprised how many people have no idea what their hurricane deductible is until it’s too late.

Our Recommendation

There’s no one-size-fits-all answer. The right deductible depends on your financial situation, how much risk you’re comfortable with, and what the premium difference actually looks like. What we can tell you is: don’t just pick the cheapest option without understanding what you’re trading off. That’s what we’re here for — we’ll run the numbers with your carrier, show you how different deductible levels affect your premium, and help you make a decision that makes sense for your life, not just for this month’s bill. Boring? Maybe. Important? Absolutely.