How much does homeowners insurance cost with a $2,500 deductible?

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Most homeowners carry a homeowners insurance policy to protect one of their largest assets. Although it’s critical to carry this protection from your home, the cost of homeowners insurance can take a big bite out of your budget.

A $2,500 deductible typically results in lower premiums. The average annual cost of a homeowners insurance policy with $300,000 in dwelling coverage and $100,000 in liability coverage is $2,338. But this also means you’ll need to be prepared to cover that amount if you need to file a claim.

One way to impact your homeowners insurance costs is by adjusting your deductible. Generally, a higher deductible will lead to lower insurance premiums. However, it’s important to choose a deductible that you can comfortably afford to pay out of pocket in the event of a claim. Balancing the monthly savings with your ability to cover potential expenses is key to finding the right deductible for your budget and needs.

How much does homeowners insurance cost with a $2,500 deductible?

The average annual cost of a homeowners insurance policy with $300,000 in dwelling coverage and $100,000 in liability coverage with a $2,500 deductible is $2,338.

However, the average annual premium varies dramatically from state to state. For example, Hawaiian homeowners pay the lowest average annual premium of $570. On the other end of the spectrum, Nebraskan homeowners pay the highest average annual premium of $5,266.

The table below shows the average annual premiums in your state for a policy with $300,000 in dwelling coverage with a $2,500 deductible.

State	Average annual premium for $2,500 deductible
Alaska	$1,395
Alabama	$2,541
Arkansas	$3,653
Arizona	$1,843
California	$1,107
Colorado	$3,548
Connecticut	$2,062
Washington, D.C.	$1,055
Delaware	$1,070
Florida	$2,410
Georgia	$2,142
Hawaii	$570
Iowa	$2,089
Idaho	$1,569
Illinois	$2,517
Indiana	$2,503
Kansas	$4,878
Kentucky	$2,552
Louisiana	$3,220
Massachusetts	$1,721
Maryland	$2,000
Maine	$1,198
Michigan	$2,834
Minnesota	$2,161
Missouri	$2,734
Mississippi	$3,875
Montana	$3,124
North Carolina	$2,073
North Dakota	$2,684
Nebraska	$5,266
New Hampshire	$1,044
New Jersey	$1,155
New Mexico	$2,116
Nevada	$1,256
New York	$2,108
Ohio	$1,843
Oklahoma	$4,483
Oregon	$1,249
Pennsylvania	$1,921
Rhode Island	$1,439
South Carolina	$2,250
South Dakota	$3,311
Tennessee	$2,528
Texas	$4,351
Utah	$1,272
Virginia	$1,822
Vermont	$1,017
Washington	$1,381
Wisconsin	$1,307
West Virginia	$1,484
Wyoming	$1,577

Comparing costs with different deductible options

When comparing insurance policies with different deductibles attached, a higher deductible tends to mean a lower premium. That’s because if you have to file a claim, you’ll pay more when you have a higher deductible. In turn, the insurer will have to pay less toward the claim.

The table below highlights how different deductible amounts impact premiums.

Dwelling coverage	Liability coverage	Average annual premium for $2,500 deductible	Average annual premium for $5,000 deductible
$300,000	$100,000	$2,338	$2,080

What are the advantages and disadvantages of having a high deductible?

As with every financial decision, there are advantages and disadvantages to choosing a higher deductible. We explore both sides of the equation below.

Pros

Lower premiums. The obvious advantage is that a higher deductible means lower insurance premiums. Depending on your situation, these savings could make a dramatic difference to your budget.
Fewer claims for small repairs. If you opt for a larger deductible, you’ll essentially self-insure smaller issues, which eliminates the paperwork attached to a claim and likely will lead to fewer claims over the long term. Fewer claims mean lower insurance rates.

Cons

Higher out-of-pocket costs. If you need to file a claim, you’ll face higher costs.
Delays. If you cannot pay the deductible immediately, you might not be able to begin repairs until you can find the cash.

How deductibles impact homeowners insurance premiums

When insurance companies determine premiums, the deductible you choose is one of the many factors considered. In general, homeowners who opt for a higher deductible will enjoy lower premiums. On the flip side, homeowners who choose a lower deductible often pay higher insurance premiums.

Tips for choosing the right deductible amount

Since your deductible has such a big impact on your premiums, it’s tempting to select the highest deductible option to tap into the lowest available rates. However, that could be an issue if you have to file a claim and can’t afford the deductible. Instead, it’s important to choose the deductible amount that best suits your situation.

Below are some tips to help you choose the right deductible amount:

Evaluate your savings. If you have to file a claim, you’ll need to pay your deductible right away. Choose a deductible that you can comfortably pay should the need arise. In other words, it’s important to have funds set aside to cover a deductible at any time.
Weigh the options. Get multiple quotes to determine how much you might save by choosing a higher deductible. Weigh the savings against the need to have more cash available for potential claims.
Compare price differences. After getting multiple quotes, you might realize that the price difference between a home insurance policy with a $500 deductible versus a $1,000 deductible isn’t too much for your situation. You might also find that one insurer can give you a policy with a lower deductible for the same or less than another company with a higher deductible.

Final take

Homeowners insurance is an unavoidable expense for most homeowners. When choosing your insurance policy, deciding on the right deductible for you matters.

Although it might be tempting to go with either the lowest or highest deductible option, the right choice is usually more nuanced for homeowners. For example, someone with an ample emergency fund might opt for a higher deductible to lock in savings. But someone with fewer savings might prefer a lower deductible, even if that means higher premium payments. Weigh your options before moving forward.

Once you’ve decided on a deductible, don’t forget to compare quotes across multiple insurance companies to find the most affordable option for your unique situation.

Resources & Methodology

Sources:

Insurance Information Institute “12 Ways to lower your homeowners insurance costs.” Accessed September 2024.

Insurance Information Institute “Homeowners insurance rates.” Accessed September 2024.

Methodology

The data provided is based on insurance policies from 2023 with $300,000 in dwelling coverage, $100,000 in liability coverage, and $2,500 deductible.

Sarah Sharkey

Contributing Researcher

Sarah Sharkey is a personal finance writer with a master’s degree in management from the Hough School of Business at the University of Florida. She enjoys helping readers find money solutions that work. She has written for numerous personal-finance publications including Money Under 30 and The College Investor.