When protecting your home from the unpredictable forces of nature, understanding your insurance policy is crucial. While most people are familiar with insurance deductibles, you may not know there are various types. Percentage deductibles play an important role in homeowners insurance in regions of the country susceptible to natural disasters. Read on to learn more about the percentage deductible in insurance and how it impacts homeowners in disaster-prone areas.
What is a Percentage Deductible in Insurance?
A percentage deductible is calculated based on the total insured value of a home or business. For example, if a home is insured for $200,000 and has a 1% wind and hail deductible, the homeowner is responsible for the first $2,000 of a covered loss before insurance coverage kicks in. In other instances, the $2,000 would be deducted from the total claim payment.
According to Central’s experts, percentage deductibles first became popular for earthquake coverage in the western United States. Eventually, they expanded onto policies in hurricane- and hail-prone regions. This option replaced the flat deductibles once offered for catastrophic damages resulting from hail and wind.
Today, percentage deductibles in insurance are common on homeowners policies in areas with a high likelihood of other catastrophic events, including wind, hurricanes, flooding, and earthquakes.
How Can You Find the Best Insurance Coverage and Value for Your Dollar?
While you can’t control the weather, there are steps you can take to ensure you’re getting the most from your insurance dollar. These include:
- Explore your deductible options. Consider whether you’re more comfortable with a higher deductible and premium savings or prefer the security of knowing you’ll pay a smaller deductible in the event of a loss paired with a higher monthly premium. Your independent agent can run different scenarios to help determine the best option for your situation and preferences.
- Invest in a weather-resistant roof. Impact-resistant roofing is a smart choice for homeowners living in areas of the country prone to hail and hurricanes. These roofs made from composite plastic, asphalt, clay, slate, or metal typically come at a premium price point but provide valuable protection against hail and wind damage.
Interested in learning more about deductibles? Check out our Insurance 101
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The coverages here are described in the most general terms and are subject to the actual policy conditions and exclusions. For actual coverage wording, conditions, and exclusions, refer to the policy or contact your agent.