Why More Insurance Companies Are Using Percentage-Based Deductibles

What’s Changing?

If you’ve had homeowners insurance for a while, you probably remember when most deductibles were simple flat amounts—$500 here, $1,000 there. That made things pretty easy to understand. You knew upfront how much you’d need to pay out of pocket if disaster struck. But over the last several years, a quiet shift has been happening. More and more insurance companies are transitioning away from flat-rate deductibles and moving toward percentage-based insurance deductibles, especially for wind and hail damage.

This trend is catching many homeowners off guard—and it’s not just a minor paperwork update. It has real financial consequences.

Percentage-based deductibles can mean the difference between a manageable $1,000 bill and a surprise $6,000 hit to your wallet after a storm. So why is this shift happening? What does it mean for you? And most importantly, how can you stay prepared?

Let’s break it all down in plain English.

What Is a Percentage-Based Deductible?

A percentage-based deductible is exactly what it sounds like: instead of paying a fixed amount, your deductible is a percentage of your home’s insured value (sometimes called your dwelling coverage).

Here’s a simple example:

Your home is insured for $300,000. Your wind/hail deductible is 2%.

• That means you’ll pay $6,000 out of pocket before your insurance company covers the rest of the repair.

Compare that to a flat deductible of $1,000 or even $2,500, and you can see how quickly this adds up.

Most of the time, percentage-based deductibles apply to specific types of claims—typically wind, hail, hurricane, or named storm events. Other types of damage, like fire or theft, may still be subject to a flat-rate deductible.

To make things trickier, some policies now combine both types, with separate deductible structures for different types of events.

Why Are Insurance Companies Doing This?

It’s not just to confuse you—there are three big reasons why insurers are moving in this direction.

1. Severe Weather Is Getting More Expensive

Hurricanes, hailstorms, and other natural disasters are happening more frequently and causing more damage than ever before. According to the National Centers for Environmental Information (NOAA), the U.S. has averaged more than 18 billion-dollar disasters per year since 2018.

That’s a massive jump from previous decades—and insurance companies are footing the bill.

To stay financially solvent, they’re adjusting their risk models. Percentage-based deductibles help them share more of the burden with policyholders, especially in regions prone to storms.

2. It Spreads the Risk

Flat deductibles mean someone with a $150,000 home and someone with a $750,000 home might both pay the same $1,000 deductible for similar damage. Percentage-based deductibles scale with the size and value of the home, which insurers argue is a fairer system.

It also encourages homeowners to maintain and protect their property. When more financial responsibility is at stake, the logic goes, people may be more likely to invest in preventative maintenance like roof inspections or impact-resistant shingles.

3. It Keeps Premiums from Skyrocketing

Premiums have been steadily rising in many parts of the country. In fact, Policygenius reports that the average cost of homeowners insurance increased by more than 20% from 2021 to 2023, with states like Florida, Texas, and Colorado seeing even steeper hikes.

By increasing deductibles instead of premiums, insurers can keep monthly costs more affordable for consumers—while still protecting themselves from massive payouts.

That might sound like a win-win, but only if you’re aware of the change and prepared to cover the cost.

What This Means for You

Here’s the bottom line: percentage-based deductibles put more financial responsibility on your shoulders when a claim happens.

Let’s go back to our example. You own a home insured for $400,000. You live in a storm-prone area and your policy includes a 2% wind/hail deductible.

• That means if a hailstorm destroys your roof, you’ll owe $8,000 out of pocket before insurance starts paying.

That’s a big check to write—especially if you didn’t see it coming.

Unfortunately, most homeowners don’t realize they’ve been switched to a percentage-based deductible until they file a claim. The deductible details are often buried in the declarations page of your policy, and changes can slip by unnoticed if you’re not reviewing your documents annually.

This is why it’s so important to know your deductible type, amount, and the scenarios it applies to—before a storm hits.

Here are a few key tips:

• Review your Declarations Page every year.
• Look for terms like “wind/hail deductible,” “named storm deductible,” or “hurricane deductible.”
• Determine if the deductible is flat or percentage-based.
• Multiply the percentage by your home’s insured value to know what you’d owe.
• If you’re not sure, call your insurance agent and ask directly.

What to Watch For in Your Policy

Insurance companies don’t always make these changes easy to understand. Keep an eye out for:

• Multiple deductibles: Some policies have one deductible for fire, another for wind/hail, and another for hurricanes.
• Named storm or hurricane deductibles: If you live near the coast, these can be especially steep—often up to 5%.
• Changes during renewal: Insurers may shift you to a percentage-based deductible without much fanfare. Read your renewal packet carefully.

If you’re feeling overwhelmed, Consumer Reports recommends setting a reminder to review your insurance policy every year—especially as climate risks and insurance practices evolve.

Final Tip: Don’t Wait for a Disaster

We get it—insurance paperwork isn’t exactly a thrilling read. But spending just 15 minutes now can save you from serious sticker shock later.

Take these simple steps:

• Pull up your current homeowners insurance policy
• Find your deductibles section (usually in the Declarations Page)
• Do the math: What would 1%, 2%, or even 5% of your home’s insured value cost you?
• Talk to your agent if you’re unsure, confused, or want to explore other deductible options

And finally, consider setting up an emergency savings fund specifically for your deductible amount. It may not be fun to think about, but it’s a smart move that gives you peace of mind when the next storm rolls in.

If you’re not sure where to begin, or want help assessing your roof’s condition before the next big weather event, reach out to the experts at Brody Allen Exteriors. And for more helpful homeowner tips and storm prep advice, visit our Brody Allen Exteriors Learning Center.

Stephen Maassen

Stephen Maassen, the founder of Brody Allen Exteriors, is deeply committed to providing top-notch roofing solutions to homeowners in Wentzville. With a strong background in construction and a keen understanding of local weather challenges, Stephen leads his team with a focus on quality, reliability, and customer satisfaction. Under his leadership, Brody Allen Exteriors has grown into a trusted name in the roofing industry, recognized for its expertise in handling everything from routine maintenance to complex storm damage repairs.