A deductible is the portion of an insurance claim the policyholder must pay before the insurance company covers the rest of the loss. When a fire or natural disaster strikes your home, the insurer sends a payment to cover repairs but “deducts” a certain amount from the check. In some cases, insurance companies require policyholders to pay the deductible upfront.
Calculating the Deductible in Your Homeowners’ Claim
Every claim you make will carry a deductible. If you have a wind damage claim in April and a hail damage claim in September, you will have to pay two separate deductibles. Of course, if the cost of repairs is less than the deductible, your insurance company won’t pay for the damage at all.
You must read your policy carefully to see how much you will have to pay before insurance kicks in. Depending on your policy, your deductible could be:
- A fixed fee. Many homeowners prefer deductibles with fixed dollar amounts because they know exactly how much they need to cover after a loss. For example, a listed $250 deductible allows a homeowner to put aside $250 during storm season in anticipation of a claim.
- A percentage of your home’s value. Percentage deductibles are calculated using a particular portion of your home’s insured value. For example, if your home is insured for $300,000 and has a 1% deductible, you would be expected to pay the first $3,000 of any loss. These deductibles increase along with the value of your home, so it’s worth comparing to see if a fixed amount or percentage is best for you.
- On a sliding scale. Some insurance companies allow policyholders to choose the amount of their deductibles by increasing or decreasing the cost of premiums. In general, selecting a higher deductible will lower your monthly insurance payments, but you’ll have to pay more out of pocket in case of a loss. A smaller deductible lessens the financial stress of a claim but can double or triple monthly premiums.
Deductibles That May Apply to Your Homeowner's Insurance Claim
A typical Texas homeowners’ policy will have different deductibles based on the cause of the damage. Some perils can cause significant damage to homes over broad areas, and these may have separate deductibles to offset the insurer’s repair costs. For example, your claim may be subject to a:
- Named storm deductible. Texas homeowners’ policies may carry a “named storm” or “tropical cyclone” deductible, sometimes called a Clause 1 deductible. This deductible is triggered when the National Weather Service (NWS) officially names a tropical storm or warns of a hurricane that causes damage to your home or property. Hurricane or named storm deductibles may be higher than deductibles for other causes of damage and are usually a percentage rather than a flat fee.
- Wind or hail deductible. Homeowners in Texas, Oklahoma, and other states in Tornado Alley may have separate windstorm and hail deductibles due to the high likelihood of damage. Wind and hailstorm deductibles are often calculated by a percentage between 1 to 5 percent.
- Flood deductible. Flooding from rainwater or storm surge is typically not covered under standard homeowners’ insurance policies. If you purchase a policy through the National Flood Insurance Program (NFIP), you will have to choose a deductible within your budget—otherwise, your home and its contents may be a total loss.
- Earthquake deductible. Some states prone to earthquakes offer special coverage for homeowners, but deductibles can be extremely high. They are almost always percentage-based and range from 2 to 20 percent of the home's replacement value.
Let Us Help You Get the Property Damage Coverage You're Owed
If your insurance company won’t pay enough to cover all of your damages, the Voss Law Firm can help. Call us at (888) 614-7730 or complete our contact form today to get answers to your questions, or start reading your copy of our free book, Tricks of the Trade: How Insurance Companies Deny, Delay, Confuse, and Refuse.