Insurance can be a complicated topic, especially when it comes to understanding terms like ‘deductibles’ – specifically, ‘percentage-based deductibles’. This article aims to simplify this concept and shed light on its impact on your insurance claims.
What is a Deductible?
A deductible is an amount you pay out of pocket before your insurer begins to pay on a covered loss. The deductible amount is usually set when you purchase your policy, and it can significantly influence your premium – a higher deductible usually means a lower premium, and vice versa.
Percentage-Based Deductibles
A percentage-based deductible is a relatively newer form of deductible. Instead of a fixed dollar amount, it is a percentage of the insured value of your property. For instance, if your home is insured for $200,000 and your policy has a 1% deductible, you’ll have to pay $2,000 (1% of $200,000) out of pocket before your insurance kicks in for a covered loss.
Impact of Percentage-Based Deductibles on Claims
Variable Deductibles
Since percentage-based deductibles are based on the insured value of your property, your deductible can vary. For instance, if you increase the insured value of your property, the deductible will increase even if the percentage remains the same.
Higher Out-Of-Pocket In Case of a Loss
In many cases, percentage-based deductibles can result in a higher out-of-pocket expense at the time of a claim, especially for properties with high insured values. This is because a small percentage of a large amount can still be a substantial figure.
Lower Premiums
Percentage-based deductibles generally result in lower premiums since you’re agreeing to a higher deductible in case of a loss. This can be beneficial if you’re financially prepared to handle a higher out-of-pocket cost in case of a claim.
Conclusion
Understanding how deductibles work, especially percentage-based ones, is crucial in making informed insurance decisions. While a percentage-based deductible can result in lower premiums and potentially significant savings, it’s essential to consider the potential out-of-pocket costs in case of a claim.
Always review your policy terms and consult with your insurance agent or a professional to fully understand the possible impacts of percentage-based deductibles on your insurance claims. Remember, being well-informed is the first step towards making wise insurance decisions. Contact us today to learn more about how we can assist with your roofing needs and ensure your property is well-protected for years to come.