Soaring Insurance Premiums Have Homeowners Gambling With Their Coverage To Save Money

Insurance costs have skyrocketed over the past few years, putting further financial strain on homeowners, who are already facing a slew of additional rising expenses.

In fact, 47% of homeowners said their insurance has “experienced a premium increase in the past year, the highest rate of insurer-initiated rate raises in more than a decade,” according to the J.D. Power 2025 U.S. Home Insurance Study.

This issue is especially problematic for homeowners in risk-prone areas, as insurance premiums often rise “in areas with the highest risk of natural disasters such as hurricanes or wildfires,” according to the National Bureau of Economic Research.

In an effort to manage costs, homeowners are increasingly taking the risk of agreeing to a higher deductible. The Insurance Information Institute found that increasing your deductible to $1,000 from $500 may decrease your premium by “roughly 10 to 25%, depending on your location, insurer, and home value.”

Understanding your insurance deductible

Simply put, a deductible is the money you have to pay before your insurance coverage kicks in.

Many homeowners choose deductibles in the range of $500 to $2,000, with around $1,000 being a common choice, according to the Insurance Information Institute.

Matt Brannon, data journalist at Insurify, says higher deductibles are one under-discussed result of rising home insurance costs, leading homeowners to shoulder more financial risk.

“As home insurance prices have soared in recent years, higher deductibles have become more popular, with one analysis showing roughly a 40% increase in the average deductible in the past two years,” he says.

Erika Tortorici, owner and principal of Optimum Insurance Solutions, says she expects this trend to increase nationwide next year, but for homeowners to be wary of banking on the option.

“Homeowners are opting for higher deductibles to control rising premiums, but insurers have also pushed the trend by reducing low-deductible options, especially in high-risk or high-loss states,” she says.

What areas of the country are actually employing this?

As Rick McCathron, president and CEO of Hippo Home Insurance, explains, while a higher deductible can reduce risk for an insurance company and may lead to lower premiums for the policyholder, it remains essential that customers can realistically afford that out-of-pocket amount if a loss occurs.

McCathron says that higher deductibles are becoming more common across the Midwest and other regions heavily affected by hail and convective storms, reflecting the growing severity of weather patterns.

In addition, this could be a solution in so-called insurance desert areas.

Anthony M. Lopez, founder and CEO of Your Insurance Attorney, explains that in markets where insurers are retreating, offering higher deductibles can help carriers continue writing new business by making the risk profile more manageable. 

“It gives policyholders access to coverage that might otherwise be unavailable,” he says, adding that, however, it’s not a panacea. 

A higher deductible shifts more of the financial burden onto the homeowner and may still leave many with unaffordable premiums or with minimal competition. In markets where only one carrier remains, the leverage still lies mainly with the insurer, he adds. 

According to him, detailed ZIP code-level data is thin, but industry sources note that in high-risk states like Florida and Texas, the prevalence of higher deductibles has jumped sharply.

“So while we don’t yet have a publicly released map of 'highest concentration” by ZIP, the pattern is clear: The most active adoption is in coastal and Southern states facing heightened catastrophe exposure,” he says.

Tortorici echoes the sentiment, noting that in some high-risk regions, carriers may only provide policies with higher deductibles because it’s the most realistic way they can continue writing business there.

“While it may not be the first choice for every homeowner, opting for a higher deductible can be one of the few paths to securing an affordable policy in challenging markets,” she says.

What kind of homeowner really wants this?

Homeowners who gravitate toward higher deductibles are typically financially stable, low-risk households looking to control rising premiums, says Tortorici.

“They’re willing to take on more self-insurance for minor damage in exchange for meaningful annual savings. They’re also usually people who rarely file small claims, stay proactive with property maintenance, and see their insurance policy as a safety net for large, catastrophic losses only. For them, the tradeoff makes sense because they value predictable monthly costs over a lower deductible they may never use,” she explains.

Experts warn that there are several factors homeowners should consider when deciding whether this is the right fit.

Hippo’s McCathron says that includes your budget: The higher your deductible, the more you may be able to save on your insurance premiums, but the more you’ll pay out of pocket when filing a claim.

You should also consider your savings and make sure you choose a deductible you can realistically cover after a loss.

“Consider how much you have set aside to manage that unexpected cost,” he advises.

Finally, look at what your carrier allows. 

“Your options depend on your provider, location, and policy type. Deductibles can range from as low as $100 to several thousand dollars,” he adds.

Pros and cons of opting for higher deductibles

Jeff Nadrich, managing attorney at Nadrich Accident Injury Lawyers, who works with wildfire victims such as families impacted by the Eaton Fire in Southern California, says that a higher deductible can lower your monthly premium, thereby making your policy more affordable.

“But when you face a catastrophic loss, the cost out of pocket can be debilitating,” he says. “Home insurance, unlike health insurance, doesn’t have payment plans available. If you lose your roof due to fire damage, for example, you have to bring your money to the table before repairs move forward.”

Additional benefits include having more control over monthly costs, making it a good option for homeowners looking to manage or reduce their regular expenses, says McCathron.

“It’s a potential fit for financially prepared homeowners: If you have a strong savings cushion, a higher deductible can offer savings without adding too much financial risk,” he says.

That’s why it's crucial that you understand your policy’s fine print and what costs you will bear if something happens.

 “A high deductible may be a set dollar amount but it also may be a percentage of the home’s value. If you don’t understand all the terms in your policy, bring it to a third party—not the salesperson—to explain it and make sure you fully understand the risks you are taking,” Bobbi Rebell, CFP, consumer finance expert at CardRates.com, says.