Mother Nature and Deductibles

If you live in the Midwest region of the country, or “Tornado Alley”, it is almost inevitable you have experienced some form of wind and hail that may or may not have resulted in an insurance claim. Whether it was your personal home, auto, or maybe a rental dwelling, you have seen the damage that Mother Nature can cause during the storm season.

As a landlord, these storms can impact to your bottom line and it is important to understand how your properties are covered against these perils. There are few different approaches to structuring your insurance deductible, and choosing the correct deducible for your portfolio could mean the difference in thousands of dollars to your bottom line. When explaining deductibles, the Insurance Information Institute says,

“A deductible can be either a specific dollar amount or a percentage      

of the total amount of insurance on a policy. Generally speaking,

the larger the deductible, the less a consumer pays in premiums for

an insurance policy.”

There is not a universally correct deductible option for everyone and it is not a certainty that you will have the liberty to choose which form will apply to your policy, but there are a few factors to understand how your deductible will affect your policy.

Percentage vs. Flat Deductibles

If you have a flat $1,000 deductible, that money would be deducted from your claim. So, if your insurance company has determined that you have an insured loss worth $10,000 you would receive a claims check for $9,000.

Percentage deductibles are based on a percentage of the property’s insured value. So if your house is insured for $100,000 and your insurance policy has a 2 % deductible, $2,000 would be deducted from the amount you are reimbursed on a claim. In the event of the $10,000 insurance loss, you would be paid $8,000.

Per Location vs. Per Occurrence Deductibles

Realizing how your deductible will apply to your property schedule is crucial. Say you have 10 rental dwellings and a single hail storm damages all 10 roofs. If you have a $1,000 per location deductible, that would equate to $10,000 in total deductibles you would pay if you were to file a claim to replace all your roofs.

Using the same situation where all 10 properties are damaged by one storm, if instead you have a $5,000 per occurrence deductible, you would only pay one $5,000 deductible if you were to file a claim to replace all your roofs.

Not all carriers will offer a per occurrence deductible, and depending on the number of locations you have and the total insurable value of your portfolio, it may not be the right fit for you. It is important that you consult your agent to explore all the possibilities that are available to you and figure out which deductible structure suits you the best.

If you have questions or would like to learn more about our unique programs for rental dwellings you can reach me at 405-507-2734 or nbritten@pi-ins.com