What is a home insurance deductible?

A home is one of the biggest investments you can make. Like all investments, protection against potential losses is key, which is where home insurance comes into play. Acting as a security blanket, home insurance provides financial protection against several risks, ensuring homeowners aren't financially responsible for the brunt of the costs. But before your insurer pays for any expenses that may arise from a covered claim, you have to cover your deductible out-of-pocket.

In this guide, we’ll break down how insurance deductibles work in Canada, what types exist, how they affect your insurance premiums, and how to choose the right amount for your property. Stick around for more info.

Home insurance deductibles: what are they?

A home insurance deductible is an amount you agree to pay out of pocket before your insurance company pays any remaining costs in your insurance claim. You can think of it as paying your share of the risk. The average home insurance deductible in Canada ranges between $500 and $2,500, depending on your insurance company and where you live.

For example, if your insurance deductible is $1,000 and your insurance company approves a claim for $7,500 in flood damage, your insurance provider will pay $6,500, and you'll only pay $1,000.

How home insurance deductibles work

Canadian Underwriter states that in 2024, 47% of all home insurance claims resulted from water damage. This was followed by fire at 20% and theft at 10%. So, how do they work? Insurance deductibles are applied per claim, not per policy. For example:

Fire damage deductible

Let's say your home suffers property damage from a kitchen fire that is estimated to cost $25,000. With a $1,000 deductible, you pay the first $1,000 of the repair and replacement bills, and your insurer pays the remaining $24,000.

Flood insurance deductible

Following a period of heavy rainfall, a local lake by your home floods onto your property. The estimated property damage is $5,000. You've added flood insurance to your standard home insurance policy with a $500 deductible amount.

Theft insurance deductible

Someone breaks into your home and steals $6,000 worth of your personal property. Your insurance company approves your claim for this dollar amount. Your deductible is $1,000, which you pay out of pocket to your insurer, and they cover the remaining $5,000.

Types of deductible options for your home insurance coverage

There are three types of home insurance deductibles in Canada:

1. Flat deductibles

Flat deductibles are the most common type of deductible when it comes to homeowners' insurance policies. It’s a fixed dollar amount you agree to pay before your home insurance coverage kicks in. For example, if your deductible is $1,000 and you have $7,000 in fire damage, your insurance company pays the $6,000.

2. Percentage deductibles

Percentage deductibles are calculated based on what your property is valued at. For example, if your home is insured for $500,000 and your deductible is 2%, you would have to pay $10,000 out of pocket before your insurance company covers any remaining costs. These home insurance deductibles are typically applied to high-risk coverage like earthquake insurance.

3. Split deductibles

Split deductibles combine a flat and a percentage home insurance deductible, depending on the covered loss. For example, you may have a $1,000 deductible for fire or theft, but a $2,500 deductible for overland flooding. This offers more customized coverage to homeowners, but can make filing an insurance claim confusing.

Always confirm with your insurance company which type of deductible you have, directly or by looking at your insurance contract for more information.

How to choose the right deductible amount for your home insurance policy

When purchasing your homeowners insurance, you'll have the option of choosing your deductible dollar amount. To ensure you choose the right amount for your financial and property needs:

Your risk tolerance

Are you comfortable paying a higher deductible out of your own pocket if it means having a lower insurance premium? If so, opting for a higher deductible may make sense.

Your current financials

Would you be able to afford a $2,500 deductible in the event you have to make a claim? If not, choosing a lower deductible and possibly paying a higher premium may be the right financial move.

Home value and location

Consider how much your property is valued at and where it's located. Do you live near dense forests? Is your home located on the shores of a natural body of water? Insured losses from weather-related events totalled $8.5 billion in 2024.

With climate change, severe weather events are becoming more frequent, so considering your local climate and location risks is essential to ensuring you're ensuring your home is insured. Ultimately, higher-value homes or properties in flood-prone or wildfire zones should consider higher deductibles.

Claims history

If you file small claims throughout the year, having a lower deductible means you're responsible for paying less over time in terms of deductible amounts. However, remember that the more time you make a claim, the higher your premiums will be, as you'll be deemed a high-risk customer.

High vs. low deductibles: pros and cons

Unsure which deductible to choose? Take a look at the pros and cons of both below:

Where you live matters: regional considerations

As we mentioned, most home insurance policies, including your deductibles, will vary based on where you live:

• British Columbia & Alberta: With a high frequency of wildfires, homeowners can anticipate paying more for certain home insurance policies and their deductibles.

• Ontario & Quebec: A high frequency of water-related claims due to freezing pipes and rainstorms may increase the standard deductibles required.

• Alberta & Saskatchewan: High winds and hail are common in the Prairies. The average deductible for hail claims in Alberta, according to the Insurance Brokers Association of Canada, is around $2,000 to $5,000, due to the frequency of summer storms.

Bundling policies: Do deductibles change?

Bundling your policies, for example, home and auto insurance, with the same insurance provider can help you save anywhere between 10% to 15% on each insurance policy. However, it's important to know that this can change how your deductible applies.

For example, let's say you bundle your home insurance and your car insurance. In a fire, both your home and car are damaged. Because you bundled your coverage together, you'll only need to pay one deductible, rather than separate deductibles. So, while bundling doesn't always change your home deductible amount, it can make the overall claims process simpler and more affordable.

Other ways to save without sacrificing your coverage

Although choosing a more expensive deductible can lower your insurance premium, there are other ways you can save without compromising your coverage:

• Upgrade your home security: Adding video cameras, motion sensor lights, and an alarm system to your home can lower your premiums by up to 15%.

• Preventative maintenance: To remain claims-free, periodically maintain your home by cleaning your gutters, installing a sump pump and backwater valve, servicing your HVAC systems, and more. You may also be eligible for a claims-free discount of up to 20%.

• Green discounts: Eco-friendly upgrades (like tankless water heaters or smart thermostats) may qualify you for rebates or discounts with your insurance provider.

Save on your coverage with BrokerLink

At BrokerLink, we help Canadian homeowners save money on their home coverage. Whether you have questions about your deductibles, need clarification before reporting a covered claim to your provider, or are looking to purchase affordable insurance that fits your needs and budget, our brokers have got you covered.

To work with us, contact BrokerLink directly over the phone or by email to speak with someone directly. You can also get a competitive insurance quote using our online quote tool at any time!

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