Soaring Premiums Push Homeowners Toward Higher Deductibles to Keep Coverage Affordable

Premium Increases Continue to Pressure Homeowners

Insurance costs have “skyrocketed over the past few years,” adding to homeowners’ broader expense challenges. According to the J.D. Power 2025 U.S. Home Insurance Study, 47% of homeowners said their insurer increased their premium in the past year, marking the highest rate of insurer-initiated premium hikes in more than a decade.

Risk location plays a vital role in these increases. The National Bureau of Economic Research notes that premiums often rise in areas with the highest natural disaster risk, including regions exposed to hurricanes or wildfires. As a result, homeowners in these risk-prone areas may face particularly steep costs.

Higher Deductibles Gain Popularity

Homeowners looking to control premiums increasingly agree to higher deductibles. The Insurance Information Institute states that raising a deductible to $1,000 from $500 may cut premiums by roughly 10 to 25%, depending on location, insurer, and home value.

A deductible is the amount a policyholder must pay before coverage takes effect. Many homeowners select deductibles between $500 and $2,000, with $1,000 being the most common choice.

Matt Brannon, a data journalist at Insurify, notes that higher deductibles represent an under-discussed consequence of rising home insurance costs. He points to an analysis showing about a 40% increase in the average deductible over the past two years.

Erika Tortorici, owner and principal of Optimum Insurance Solutions, anticipates that the trend toward higher deductibles will continue nationwide next year. She also notes that insurers have contributed to this shift by reducing low deductible options, especially in high-risk or high-loss states. In some regions, carriers may offer policies only with higher deductibles as a realistic path for continuing to write business.

Where Adoption Is Increasing

Rick McCathron, president and CEO of Hippo Home Insurance, explains that higher deductibles reduce risk for insurance companies and may lower premiums for customers. However, he emphasizes that customers must be able to afford the out-of-pocket amount if they file a claim.

McCathron notes that higher deductibles are becoming increasingly common in the Midwest and other regions heavily impacted by hail and convective storms, reflecting the growing severity of weather conditions. He adds that higher deductibles may also provide a solution for insurance desert markets.

Anthony M. Lopez, founder and CEO of Your Insurance Attorney, notes that in areas where insurers retreat, higher deductibles enable carriers to continue writing new business, as insurers can manage the risk profile more effectively. He adds that this approach can allow policyholders to access coverage that might otherwise be unavailable. Still, Lopez notes that a higher deductible shifts more financial burden to the homeowner and may not make premiums affordable in all cases, especially where limited carrier competition remains. In markets with only one insurer, the leverage remains primarily with the carrier.

Lopez also says that publicly released ZIP code data remains limited. Even so, industry sources indicate that higher deductible prevalence has jumped sharply in high-risk states such as Florida and Texas. He describes a broader pattern of active adoption in coastal and Southern states with greater catastrophe exposure.

Homeowners Most Likely to Choose Higher Deductibles

Tortorici says homeowners who select higher deductibles tend to be financially stable and low-risk households that want to manage premium growth. She explains that these homeowners accept more self-insurance for minor damage in exchange for annual savings. They usually file fewer small claims, maintain their property proactively, and view their insurance primarily as protection against major losses. For them, predictable monthly costs outweigh the value of a lower deductible they may not use.

Experts advise policyholders to evaluate several factors before increasing deductibles. McCathron recommends that homeowners review their budget, as a higher deductible may reduce premiums but increase out-of-pocket claim costs. He also encourages homeowners to examine their savings and choose a deductible they can realistically cover after a loss. In addition, he notes that deductible options depend on insurer rules, location, and policy type, and may range from $100 to several thousand dollars.

Benefits and Risks for Policyholders

Jeff Nadrich, managing attorney at Nadrich Accident Injury Lawyers, says higher deductibles can lower monthly premiums and make policies more affordable. However, he warns that significant losses can create debilitating out-of-pocket costs. He points out that home insurance does not function like health insurance, because it typically does not provide payment plans. For example, if a homeowner loses their roof due to fire damage, they must pay the deductible before repairs can begin.

McCathron notes that higher deductibles give policyholders more control over their monthly expenses, which can appeal to homeowners focused on reducing regular costs. He also suggests that higher deductibles may be suitable for financially prepared homeowners with substantial savings cushions, as these homeowners can capture premium savings without incurring excessive financial risk.

Finally, Bobbi Rebell, CFP and consumer finance expert at CardRates.com, emphasizes the importance of understanding policy details. She notes that high deductibles may be set at specific dollar amounts or as a percentage of a home’s value. She advises homeowners who do not fully understand their policy terms to seek clarification from a third party who is not the salesperson, to ensure they recognize the risks they assume.