Question

What do you think is the purpose of a deductible in property insurance? Please be specific in your response to this question and provide an example.

Answer 1

Answer : - 4).

Insurance deductibles

Deductibles have been an essential part of the insurance contract for many years. Understanding the role deductibles play when insuring a car or home is an important part of getting the most out of your insurance policy.

Deductible defined

A deductible is an amount of money that you yourself are responsible for paying toward an insured loss. When a disaster strikes your home or you have a car accident, the amount of the deductible is subtracted, or “deducted,” from your claim payment.

Deductibles are the way in which a risk is shared between you, the policyholder, and your insurer. Generally speaking, the larger the deductible, the less you pay in premiums for an insurance policy.

A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. The sum is set up by the terms of your inclusion and can be found on the affirmations (or front) page of standard property holders and accident coverage arrangements. State protection directions entirely manage the manner in which deductibles are joined into the dialect of an arrangement and how deductibles are actualized, and these laws can change from state to state.

How deductibles work

For dollar amount deductibles, a specific amount would come off the top of your claim payment.

For example, if your policy states a $500 deductible, and your insurer has determined that you have an insured loss worth $10,000, you would receive a claims check for $9,500.

Percentage deductibles generally only apply to homeowners policies and are calculated based on a percentage of the home’s insured value. So if your home is safeguarded for $100,000 and your protection arrangement has a 2 percent deductible, $2,000 would be deducted from any case installment. In case of the $10,000 protection misfortune, you would be paid $8,000. In case of a $25,000 misfortune, your case check would be $23,000.

Note that with collision protection or a mortgage holder's arrangement, the deductible applies each time you document a case. The one noteworthy exemption to this is in Florida, where sea tempest deductibles explicitly are connected per season instead of for each tempest. Deductibles generally apply to property damage, not to the liability portion of homeowners or auto insurance policies. To use a a homeowners policy example, a deductible would apply to property damaged in a rogue outdoor grill fire, but there would be no deductible against the liability portion of the policy if a burned guest made a medical claim or sued.

Raising your deductible can save money

One way to save money on a homeowners or auto insurance policy is to raise the deductible so, if you're shopping for insurance, ask about the options for deductibles when comparing policies.

Increasing the dollar deductible from $200 to $500 on your auto insurance can reduce collision and comprehensive coverage premium costs. Heading off to a $1,000 deductible may spare you considerably more. Most mortgage holders and leaseholders back up plans offer a base $500 or $1,000 deductible. Raising the deductible to more than $1,000 can save money on the expense of the approach. Of course, remember that in the event of loss you'll be responsible for the deductible, so make sure that you're comfortable with the amount.

Homeowners disaster deductibles

Wind/hail and hurricanes are covered by standard homeowners insurance; flood and earthquake policies are purchased separately by homeowners. Be that as it may, every one of these calamities has their own deductible principles. In case you're in a zone that is high hazard for one of these cataclysmic events, see the amount of a deductible you'll have to pay if a calamity strikes. Start here, check your policies and speak to your insurance professional to learn exactly how your particular deductibles work.

• Hurricane deductibles. In hurricane prone states, special deductibles may apply for homeowner’s insurance claims when the cause of damage is attributable to a hurricane. Regardless of whether a tropical storm deductible applies to a case relies upon the explicit "trigger" chosen by the insurance agency. These triggers fluctuate by state and backup plan and as a rule apply when the National Weather Service (NWS) authoritatively names a typhoon, proclaims a storm watch or cautioning, or characterizes a sea tempest's force as far as wind speed. Hurricane deductibles are generally higher than other homeowner’s policy deductibles and usually take the form of a percentage of the policy limits. In some states, policyholders have the option of paying a higher premium in return for a traditional dollar deductible; however, in high-risk coastal areas insurers may make the percentage deductible mandatory.
• Wind/hail deductibles work in a similar way to hurricane deductibles and are most common in places that typically experience severe windstorms and hail. These incorporate Midwestern states (like Ohio) and around Tornado Alley (which experiences Texas, Oklahoma, Kansas and Nebraska).Wind/hail deductibles are most commonly paid in percentages, typically from one to 5 percent.
• Flood insurance offers a range of deductibles.  If you have—or are considering buying—flood insurance, make sure you understand you’re deductible. Flood insurance deductibles vary by state and insurance company, and are available in dollar amounts or percentages. Furthermore, you can choose one deductible for your home's structure and another for its contents (note that your mortgage company may require that your flood insurance deductible be under a certain amount, to help ensure you'll be able to pay it).
• Earthquake insurance has percentage deductibles that are anywhere from 2 percent to 20 percent of the replacement value of your home, depending on location. Safety net providers in states that have higher than normal danger of tremors (for instance, Washington, Nevada and Utah), regularly set least deductibles at around 10 percent. In California, the basic California Earthquake Authority (CEA) policy includes a deductible that is 15 percent of the replacement cost of the main home structure and starting at 10 percent for additional coverages (such as on a garage or other outbuildings).