Every property insurance policy out there has a deductible. Typically, homeowner’s insurance policies have deductibles ranging from $500 to $2,500, commercial policies have larger policies, and hurricane deductibles are usually a percentage of the total coverage limit.
As a basic rule, deductibles work like this: your insurance company should pay you the total amount of your loss minus the amount of your deductible. Here’s an example:
Imagine you have a loss to your property that will cost $10,000 to repair. You have a policy with a $2,500 deductible. The insurance company should pay you based on this math:
$10,000 (the total amount of your loss) – $2,500 (the amount of your deductible) = $ 7,500 (the amount that gets paid to you)
You don’t have to pay your deductible before the insurance company pays
Unlike health insurance, with property insurance, your deductible is just the amount that your total insurance claim payment gets reduced by. You don’t have to pay the deductible to get paid by your insurance company. That’s because your property insurance company normally pays you, not a repair contractor when you’ve had a loss. You’re then responsible for making any repairs, but you should get paid by your insurance company whether you’ve made the repairs or not.
Whatever you get paid, the deductible was already taken out of it. That means that once you get a check, you don’t have to do anything about the deductible as you work on getting your property repaired.
What is a “below deductible” letter?
Insurance companies refuse to pay insurance claims for two reasons:
(1) They say the insurance claim isn’t covered by the policy. You’ll then receive a “denial letter”, a letter refusing to pay because there is no coverage.
(2) They say the amount of the loss is less than the deductible. You’ll then receive a “below deductible letter”, a letter refusing to pay because the amount of the repair is smaller than the deductible. The insurance company should give you a copy of its adjuster’s estimate so you can see what was and wasn’t included in that estimate.
As frustrating as it is to be told your insurance company isn’t going to pay you, you’re actually better off getting a below deductible letter than a denial letter. If you want to dispute a denial in court, the insurance company is going to fight you on whether there’s coverage for the loss and on the cost of repair. You have to win both fights to get fully compensated for the loss. With a below deductible letter, the insurance company has already acknowledged that your policy covers your loss, therefore the only fight is about the amount of loss.
Adjusters are notorious for underestimating the true cost of repair, missing areas of damage, or ignoring legal issues. If you think you had a loss beyond your deductible amount, don’t just take the adjuster’s estimate at face value. We fight underpaid claims, that includes claims where nothing is paid because of a deductible.
Legal issues impacting property insurance deductibles
Often there are legal issues that impact whether and how much of a deductible should be applied. In some cases, deductibles don’t apply to all parts of a loss. For example, some specific coverages in your policy may say that the deductible doesn’t include, coverage for a fire department service charge or for credit card fraud.
Sometimes policies are written to have different deductibles under different circumstances and insurance companies don’t always apply their deductible clauses correctly.
In other cases, the deductible can be “absorbed” if the amount of loss under one coverage exceeds the limit. This can mean a higher payment on the other parts of the loss.
Deductible clauses vary from policy to policy and are often changed inside of policies by endorsements. As part of every case we handle, we review your entire policy to see if the insurance company followed the law and whether any clauses can be interpreted in favor of additional benefits to you under the policy.
Do you need a lawyer to help with your property insurance claim?
If you think you may have a dispute with your insurance company about your deductible or any other reason, we’re here to talk. Please call us at (727) 440-3764 or fill out a consultation form online to talk with a lawyer about your insurance issue.
The initial consultation is completely free. If you end up hiring us as your insurance attorney, we work on a contingency, meaning that we get only get paid if we recover money from the insurance company for you.