Do you understand everything about insurance deductibles? – II

In our last post, we began discussing how those individuals who not only know the terms of their own policies inside out, but who also have a fundamental understanding of the insurance vernacular may find themselves in a much better position when dealing with their insurance company.

To that end, we began exploring the term “deductible,” which is essentially the apportionment of risk between the policyholder and the insurance company, or, more simply, your share of the loss endured deducted from the value of the claim submitted.

What is the advantage, if any, of agreeing to raise a deductible?

When a policyholder agrees to a higher deductible on their homeowners’ or auto insurance, it will typically result in lower premiums, meaning the amount a person pays (annually, every six months, monthly, etc.) to secure coverage.

For example, experts indicate that someone who agrees to raise their auto insurance deductible from $200 to $500 can see the cost of their premiums for collision coverage fall by anywhere from 15-30 percent.

While this level of savings is nothing to scoff at, it’s important for policyholders to understand that they will be responsible for a significantly higher amount in the event of an incident.

How do deductibles work in relation to liability claims?  

Speaking strictly from the perspective of homeowners’ and auto insurance, deductibles typically apply only to property damage, not liability claims.

For example, if a homeowner is sued after a visitor is injured in their home, then no deductible will be required. However, if a homeowner has a tree crash into their home, they will be required to pay a deductible.   

What about wind damage deductibles?

Homeowners, particularly those who live in coastal states like Florida, should understand that there are essentially two types of wind damage deductibles:

  • Hurricane deductibles: Apply only to damage caused by hurricanes
  • Wind/hail deductibles: Apply to all manner of wind damage

As to when a homeowner will pay the higher hurricane deductible, it depends largely on what the insurance company deems to be the triggering event. For example, it may hinge on whether the National Weather Service declared a hurricane watch or warning, officially named a tropical storm or measured a certain wind speed reading.

How long have hurricane deductibles been around?

To recap, hurricane-related deductibles, which are typically percentage-based and relatively high, are generally paid per season versus per weather event. These deductibles first appeared on the scene in Florida after the catastrophic destruction caused by Hurricane Andrew back in 1992.

Specifically, insurers realized that they would have to start requiring homeowners to pay separate and higher premiums for hurricane damages in order to cover some of the costs and remain solvent.

Please consider speaking with a skilled legal professional to learn more about your options in the event an insurance company has unjustly denied payment or underpaid your claim.