Your policy deductible and overall coverages are the most important things to review to make sure you get the best value for your insurance premium. Coverages to review include your dwelling coverage, fair rental value, and liability coverage. One part that everyone thinks about, but sometimes makes strange decisions is regarding the policy deductible.
What is the Policy Deductible?
The policy deductible is the amount that you are responsible for before the policy will begin paying for a covered loss. For example, if you have a $1000 deductible, you would be responsible for the first $1000. The policy covers anything over that deductible up to your policy limits.
Because this is the amount that you cover, the higher the deductible is, the lower your premium. The lower the deductible, the higher your premium. Most people understand this and know how deductibles work. However, when considering what deductible you choose, people sometimes don’t consider all of the factors.
Your policy may have several deductibles. The most common here in Florida are the All Peril (AOP) deductible and the hurricane deductible.
What Policy Deductible Should I Choose?
There is no right or wrong answer to which policy deductible you should choose for your florida landlord insurance policy. I’ve heard people say, “I would never put in a claim for less than $5000, so that should be my deductible.” Is this a good way to think about it? Not really – for several reasons. Let’s take a look at the factors you should consider when choosing your deductible.
- Price Difference – How much are you saving vs. how much extra you would pay for a claim? In the example above, let’s say going from a $1000 deductible to $5000 would save $80 per year. We know that the person wouldn’t put in a claim for $2500 as they said above. However, if they have a $20,000 claim, they are going to pay $4000 more out of pocket with the $5000 deductible vs the $1000 deductible. That means if you have 1 claim is 50 years, you break even ($4000 more out of pocket/$80 savings per year). Now, if you save $1500 per year in premium, you may have a different answer. This is why the price difference is an important consideration when choosing your policy deductible.
- How Many Properties? – The price difference above is for one policy. Now, if you have 20 properties that all save $100 per year, that might change your overall calculation on the timeframe to break even. You may be willing to take a little more risk here if the combined savings is significant.
- How Many Properties are at Risk at Once? When thinking about the total number of properties, how close are they? If they are right next to each other and 1 fire could damage all of them, you may make a different choice than if you have a property in Orlando, one in Ft. Myers, and one in Tampa. Remember hurricanes can impact a large portion of the state all at once, so that’s always something to keep in mind here in Florida.
Getting the most value out of your insurance premiums is important. There are always things to consider when setting up your policy to make sure that you are saving the most money, but not sacrificing coverage if you have a claim. Your policy deductible is one of those things, and we hope that this article helped shine some light on things that you should consider.
We want to help you maximize your cashflow while properly protecting your investment. If you have additional questions or if you haven’t reviewed your policy recently, contact us today. Our team of experts at Think Safe Insurance will be happy to do a FREE review for you!
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