Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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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 (home and auto) have a flat rate deductible.

You may see a $250, $500 or $1,000 deductible apply to any covered property loss depending on your particular policy.

Beware: Wind Damage May Carry a Higher Deductible

But 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 a single 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.

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Wind Can Lead to Large Groups of Claims and Be Financially Devastating

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. Ouch!

Why? Well, 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.

In turn, it keeps them in business and allows them to make good on all those claims…

For a non-windstorm claim, you may only need to pay a $500 deductible or something similar.

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.