Property insurance is critical to protecting a real estate investment. Property insurance policies have many different provisions for real estate investors to review. Deductibles are an important piece of the property insurance policy since it is a direct cost to the policyholder. Property insurance policies typical have two different types of deductibles.
- Flat Deductible – a flat deductible is a specific dollar amount identified in the policy, which applies to each loss. For example, if we assume you have a property policy with a $5,000 deductible and a total limit of $500,000, and your home sustains a $100,000 loss due to a fire, then you will receive a $95,000 claim payment (if no coinsurance exists). This is determined by subtracting the deductible from the loss amount.
- Percentage Deductible – a percentage deductible applies to perils that can cause catastrophic losses, such as hurricanes or earthquakes. These percentage deductibles are especially common in areas subject to a particular peril, such as the gulf coast for hurricanes. In another example, if we assume your policy has a 5% hurricane deductible, the same $500,000 total limit and sustains a $100,000 loss from a hurricane, then the claim payment would be $75,000. This is determined by subtracting the deductible, $25,000 (5% x $500,000) from the loss amount.
The applicable deductibles can vary based on the level of risk exposure for the real estate investment. Investors can increase both deductible types in order to reduce premiums. We have many years of experience understanding deductibles and are here to help you consider what deductible may be best for your real estate investments.
REI Choice is the bi-product of a seasoned real estate investor and successful insurance executive. The ideation behind the company began in 2017 from a chance introduction and a combination of two unique visions. We are a licensed insurance agency in the State of Texas. We are able to offer these products nationwide.
REI Choice Insurance, LLC
519 East Interstate 30
Rockwall, TX 75087