What is the effect of a high deductible on a homeowner's insurance policy?

A high deductible on a homeowner's insurance policy primarily affects the premium cost by reducing it. When homeowners choose a higher deductible, they are agreeing to pay more out of pocket before the insurance coverage kicks in for a claim. This higher threshold usually results in lower monthly or annual premium payments because the insurer's risk is diminished—the homeowner is taking on greater financial responsibility for smaller claims.

By raising the deductible, policyholders are often able to save money on their premiums, making their insurance more affordable overall. This trade-off works well for those who may not file many claims and are comfortable with paying more upfront in the event of a loss.

The other options do not accurately reflect the impact of a high deductible. For instance, a high deductible does not guarantee full coverage; it simply means that certain costs will need to be covered out of pocket before insurance applies. Similarly, a higher deductible does not increase the payout amount for small claims, as it can make it less likely that small claims will be filed if the homeowner must first cover a significant portion of the loss. Lastly, opting for a high deductible does not eliminate out-of-pocket expenses; rather, it shifts more financial responsibility to the homeowner for initial costs associated with claims.