A deductible (for property insurance) is the amount of money a policyholder is responsible for paying out of his or her own pocket in the event of a claim.
Typically, personal lines policies have a flat rate deductible. You may see a $250, $500 or $1,000 deductible apply to any covered property loss.
You may notice a higher flat rate deductible or a separate “percentage” deductible for wind damage when shopping for a homeowner’s policy.
Your eyes are not deceiving you. Insurance companies often charge a different (higher) deductible for property damage resulting from windstorms.
The explanation lies in the fact that insurance companies do not intend to pay out several claims arising out of one event. Insurers only want to cover “ideally insurable” risks.
One of the criteria that makes a risk ideally insurable is that it is not grouped with a bunch of other risks that can cause the insurer to pay several claims at once, adversely affecting their reserves.
In the event of a windstorm, several claims will likely be turned in to the insurance company, as multiple houses are typically damaged at the same time during a severe storm.
For example, if your home were valued at $200,000, your 2% windstorm deductible would be $4,000 rather than the $500 or $1,000 standard deductible for other losses.
If 50 homes in your neighborhood file a claim for the same event, the insurance company would be able to collect quite a bit more money by charging a higher deductible, thereby protecting their finances and reserve ratio.
For a non-windstorm claim, you may only need to pay a $500 deductible. The odds that several homeowners in your area will file a claim at the same time for damages other than a windstorm are quite low. Therefore, the deductible is fixed at a certain dollar amount.