Understanding Insurance Deductibles On Your Investments

[Zach Mosholder]

Deductibles play a huge role in insurance. If you know how to use them properly, you can use them to your advantage to lower premium while still avoiding big out of pocket expenses in the event of a claim. On the reverse, you can be negatively impacted if your insurance company or agent doesn't make you aware of some potential issues. 

For example, a common thing I see all the time when working with investors, is the 5% wind/hail deductible. I'll give you an example below to help paint a picture of why you need to look out for it. 

Let's say your property is insured for $500,000 and you file a claim for wind damage. Before the insurance company pays you any money, you're stuck paying 5% which would be $25,000.

More than likely, the roof of your building is going to suffer the most damage. The cost to replace that, depending on many factors, is probably going to be under that deductible amount. Even if the cost of roof, siding, etc to fix is over the deductible, the insurance company will still only be paying a fraction of what you are. The goal is to have it the other way around.

Deductibles can play a huge part in insurance. Make sure you are getting the most out of them.