UNDERSTANDING PROPERTY DEDUCTIBLES TO AVOID SURPRISES AT CLAIM TIME By Cathy Trischan
A hurricane caused significant damage to three buildings owned by your commercial client. Your insured knows the policy includes a $100,000 deductible for wind damage and is (grudgingly) prepared to pay for the first $100,000 in damage. Imagine his surprise, though, when the claims adjuster explains that the total deductible for this loss is $300,000! The adjuster points to an endorsement that applies the wind deductible separately to each building. The insured and the producer missed this detail, and the agency 4
nervously anticipates the errors and omissions claim it is sure will follow. In reviewing quotes, the detail of how a deductible applies is sometimes overlooked. Below are some of the things to consider when evaluating deductible options.
FLAT DEDUCTIBLES With a flat deductible, a set dollar amount is deducted from the amount of the loss. The same deductible may apply to all covered causes of loss, or a higher deductible may apply to certain perils such as windstorm or theft. MARCH 2024
PERCENTAGE DEDUCTIBLES The key to understanding a percentage deductible is to understand what the deductible is a percentage of. While it is possible that the deductible is a percentage of the loss, that approach is not common. Usually the deductible is a percentage of the property limit or a percentage of the value of the property. But what property? Is it all damaged property, all property at the location, or all property covered by the policy? Some policies even include business