How Do Earthquake Deductibles Work?
How Does a Percentage Earthquake Deductible Work?
Instead of paying a fixed deductible such as $1,000 or $2,500, an earthquake deductible may be calculated as a percentage of the applicable insured amount.
The Percentage Matters
A 5%, 10%, 15%, or other deductible percentage can create very different homeowner responsibilities depending on the insured value to which it applies.
The Insured Amount Matters
The dollar value of a percentage deductible generally increases as the applicable coverage limit increases.
Example
If a policy applies a 10% deductible to a $500,000 dwelling amount, that percentage represents $50,000. The actual claim calculation depends on the policy wording and applicable coverage section.
One Earthquake Policy Can Have More Than One Deductible Rule
Depending on the policy, the dwelling, personal property, and additional living expense portions may not all use the same deductible structure.
The primary structure may have a percentage deductible based on the insured dwelling amount, subject to the specific policy.
Belongings may have a separate deductible, different percentage, or other treatment depending on the earthquake policy.
Temporary living expenses may have different deductible provisions or may be subject to separate limits and conditions.
Deductibles can vary by insurer, policy form, property type, location, coverage option, and selected percentage.
What Should You Compare Before Choosing a Deductible?
Look at the deductible in actual dollars, not only as a percentage, and compare that responsibility with the premium, coverage limits, and financial risk you are comfortable retaining.
Calculate what the percentage represents in dollars based on the applicable insured amount so the deductible is easier to understand.
Higher deductibles may reduce premium, but they can also increase the amount of loss the homeowner is responsible for after a qualifying earthquake.
Compare dwelling, personal-property, and loss-of-use limits along with the deductible so you are not evaluating one policy feature in isolation.
Think about how much of a major earthquake loss you could reasonably absorb before insurance begins paying under the applicable policy provisions.
Do You Know What Your Earthquake Deductible Means in Dollars?
Best Formula Insurance can help homeowners compare earthquake deductible options, dwelling limits, personal property, additional living expenses, coverage terms, and other earthquake insurance considerations.