General FAQs

What is a deductible and how does it affect my premium?

All FAQs

Quick answer: A deductible is the amount you pay out of pocket before insurance pays on a covered loss. A $2,500 deductible means you absorb the first $2,500, the carrier pays the rest.

A deductible is the amount you agree to pay out of your own pocket on a covered claim before your insurance starts paying. With a $1,000 deductible on a $10,000 covered loss, you pay $1,000 and your insurer pays $9,000. In general, the higher your deductible, the lower your premium.

How does a deductible affect my premium?

Deductible and premium move in opposite directions. As the Insurance Information Institute puts it, "the larger the deductible, the less you pay in premiums," and "one way to save money on a homeowners or auto insurance policy is to raise the deductible." The trade-off on a typical Georgia homeowners policy looks like this (actual numbers vary by home, ZIP, and carrier):

  • $1,000 deductible: highest relative premium; you pay $1,000 on a $12,000 claim.
  • $2,500 deductible: lower premium; you pay $2,500 on that same claim.
  • $5,000 deductible: lower still; you pay $5,000 of it.

How does a wind and hail deductible work in Georgia?

Many Georgia homeowners policies carry a separate named storm deductible for wind and hail, often written as a percentage of the home’s insured value rather than a flat dollar amount. The Insurance Information Institute confirms these "are most commonly paid in percentages, typically from 1 percent to 5 percent" of Coverage A. For example, if a house is insured for $100,000 and the policy carries a 2 percent wind and hail deductible, $2,000 is deducted from any claim payment. On a $400,000 Georgia home with a 2 percent wind and hail deductible, the out-of-pocket reaches $8,000 before the policy pays; at 5 percent it is $20,000. The National Weather Service office serving north and central Georgia records about 19 days of damaging winds and 7 days of large hail per year, and nationally wind and hail are the leading cause of homeowners claims, with 2.8 percent of insured homes having such a loss in a typical year.

Do deductibles work differently for each type of insurance?

  • Homeowners (standard): usually a flat $1,000 to $2,500.
  • Homeowners (wind and hail): often a percentage; hurricane deductibles "usually take the form of a percentage of the policy limits."
  • Auto: separate collision and comprehensive deductibles; liability has none.
  • Flood (NFIP): a separate policy with separate deductibles for building versus contents; raising to the $10,000 maximum "could lower the yearly cost by up to 40%."

Because standard homeowners does not cover flood, the deductible on a flood policy is an entirely separate calculation. Our FAQ on why flood is excluded from homeowners policies explains that gap and what a separate flood policy covers.

Should I raise my deductible to save money?

A higher deductible lowers the premium, but only up to the amount that could be paid out of pocket on short notice. Checking emergency fund balance, claim history, percentage deductibles, and the real dollar savings in combination gives a complete picture of the trade-off. For example, a homeowner who saves $180 a year by raising from $1,000 to $2,500 would need roughly eight claim-free years to break even on that extra $1,500 of exposure. Our FAQ on replacement cost versus actual cash value covers a related variable that changes how much is received after the deductible comes out.

Common deductible mistakes Georgia homeowners make

  • Forgetting the percentage wind and hail deductible exists.
  • Over-raising to chase a lower premium.
  • Assuming homeowners covers flood (it does not).
  • Never re-checking after rebuilding costs rose (a percentage deductible grows with insured value).

For example, a Marietta homeowner who insured at $300,000 in 2019 now has a $450,000 replacement value after renovation. A 2 percent wind and hail deductible that was $6,000 at purchase is now $9,000, yet many homeowners never revisit that figure. Our FAQ on what to do when a carrier estimate is too low covers a related issue that often surfaces after a deductible is applied. You can look up this and any other term in our insurance glossary.

Olive Cover, the consumer brand of Olive Insurance Services, LLC, an independent property and casualty agency in Johns Creek, can compare your options across the carriers available through us and show what each deductible would cost at claim time. Request a free coverage review and a licensed advisor will walk through every deductible line by line.