Insurance policy misconceptions - Part 1 - How deductibles are applied

The other day I was on the phone with a potential client discussing a water damage claim when the subject of her deductible came up.  She explained that the reason she was hesitant to file a claim with her insurance company was that she could not afford to pay the deductible. You know the old saying, “if I had a dollar for every time….” It seems that at least once a week I have this conversation with a policy holder. In actuality, no one really “pays” the deductible. The reason it’s called a deductible is that it is deducted from any payout that an insurance company makes on your insurance claim.
 
For example, let’s say that Swamp Grass Property & Casualty is going to pay $10,000 you for water damage to your property and the deductible in your policy is $2,500. That amount will be deducted from the $10,000 and you will receive a check for $7,500.
 
Let’s look at another scenario involving a hurricane deductible which is much higher than the regular or “all other perils” deductible example above. These deductibles are usually 2% to 5% of Coverage A.  Coverage A is the amount that your building is insured for and this information can be found on the Declarations page of your homeowners insurance policy.  Let’s say that Coverage A is $350,000 and your hurricane deductible is 2%. That means your friends at Swamp Grass Property & Casualty will deduct $7,000 from any payment issued if you have hurricane damage to your property (ouch!).
 
I hope this clears up any confusion regarding deductibles. Don’t miss next week’s blog “Insurance Policy Misconceptions Part 2” where we will discuss under deductible insurance claim payments.
 
If you have any questions, please contact us here or call 561-288-6434 and we will be happy to assist you.