Deductibles: compare the dollars and the reserves

A deductible may be a dollar amount or a percentage. For a percentage, find exactly what amount is multiplied: an insured building value or another amount specified by the contract. Do not assume the percentage applies to the repair bill.

Texas DOI illustrates how different deductible structures change a payment even when a repair cost is the same. It is a useful arithmetic explanation; the actual policy still controls the applicable amount and settlement. Read the official deductible examples.

Illustrative calculation: 2% of a $400,000 contractual basis is $8,000. Record separate all-other-peril, wind/hail, hurricane or other deductibles when the proposal has them. Ask whether an aggregate or a different time period applies.

Assume the coverage terms are otherwise identical for this example. Quote A costs $1,800 a year with a $1,000 deductible. Quote B costs $1,500 with a $5,000 deductible. B saves $300 a year and increases the deductible by $4,000. Real quotes often differ in more ways.

The model subtracts the deductible before applying an entered limit. Actual settlement may also involve depreciation, sublimits, coinsurance or exclusions. The tool does not decide whether a loss is covered.

At $300 per year it takes 13.33 no-claim years to accumulate the additional $4,000 deductible exposure, ignoring interest and changes in premium. That is not an expected claim frequency, an investment return or a recommendation to take B.

If there is no annual saving, there is no relevant savings crossover. If the deductible is lower and the premium is lower, investigate other differences rather than assume the offer is automatically superior. Use the deductible comparison with the actual values from your proposals.

Think about cash available at the time of a loss, not only the annual budget. A deductible, urgent mitigation work and continuing loan payments may arrive before any reimbursement. A portfolio can have exposure at more than one property during the same weather event.

• Keep accessible reserves separate from a planned future saving.
• Check each property’s contractual deductible basis and limits.
• Ask how multiple events or multiple buildings are treated.
• Compare longer repair periods in the rental-income stress test.

Write down the form, covered causes, exclusions, roof settlement, valuation, income terms and relevant endorsements beside the premium/deductible comparison. Mark missing terms unknown and request written clarification. Do not infer a discount, a claim payment or a renewal offer from a generic calculator.

A useful partner inquiry is specific: “This proposal shows a percentage wind deductible. What basis does it use, when does it apply, and how would other settlement provisions affect this example?”