A deductible is the amount that is paid by a policy holder before the Insurance Company will pay a claim. It is often deducted from the amount of payment and can be either in the form of a dollar amount or a percentage of the amount of insurance. Deductibles can be applied on every claim made or in some cases one deductible may apply for the entire policy term (typically health insurance deductibles). It is important to understand your coverage deductibles when selecting a policy to meet your needs. Choosing a higher deductible is often a way to reduce your policy premium but you must be able to pay this amount if a loss occurs. Some coverages such as water damage and earthquake coverage can also have higher deductibles applied. Review your policy and policy wordings for information on your deductible and how it will be applied if a loss occurs.
Example of how a deductible works with property insurance:
If your house was broken into and $8000 worth of items were stolen; if you have a $500 deductible, you will pay the first $500 of the loss and the insurance company pays the remaining $7500.
Car Insurance Deductible – Car insurance deductibles typically apply to collision and comprehensive coverage. The two coverages may have the same deductible or policy holders may select different deductibles for each.
Earthquake Deductible – With property insurance, earthquake coverage typically has its own deductible which is a percentage deductible. The percentage is based off of the amount of insurance, not the amount of the claim. With percentages typically ranging from 4 to 10%, earthquake deductibles can be a significant amount. To ensure you can pay your earthquake deductible, we recommend purchasing Earthquake Deductible Buy-Down Coverage.
Earthquake Deductible Buy-Down Insurance – For a minimal charge, Earthquake Deductible Buy-Down Insurance lowers the deductible you will need to pay in the event of an earthquake claim.
Strata Earthquake Deductible Assessment Insurance – If you live in a strata complex, your building is likely insured under a Commercial Strata Policy with a large earthquake deductible. You may be assessed your portion of this deductible if an earthquake occurs and the building needs to be repaired or replaced. You can purchase a Strata Earthquake Deductible Assessment Insurance policy to cover this assessment. You can read more about this on our post Strata Earthquake Deductible.
Glass Insurance – Although glass is covered under most home insurance policies, typically the policy deductible will apply. A separate glass policy can cover your windows with no deductible.
Ask your broker for more details on your insurance deductibles.