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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If you’re no stranger to the TTAI website, you probably already know what an insurance deductible is. If not, follow the previous link.

Or if you are a property owner in the northeast United States (Sandy), you probably know that a deductible can severely impact how much money you are “out of pocket” in the event you suffer a loss.

One of the more common deductible related questions insurance agents field from their clients is whether or not their collision and comprehensive deductibles are assessed per incident or just once over the term of their policy.

Well, Which Is It?

The bad news is the deductible you choose for the physical damage coverage portion of your auto insurance policy applies on a per accident basis.

This means that if you have a $500 collision deductible and file a claim for $5,000 in damage to your car, you’re on the hook for the first $500 and the insurer pays the remaining $4,500.

If you get your car out of the repair shop and get into another accident (even if on the way home from the shop) you’ll be out another $500 if you file another claim…and you can expect your insurance premium to increase as well!

The only real limit to the number of deductibles you could potentially pay is based on the number of claims you file.

For this reason, it’s best to be reasonable when determining whether or not to file a claim, especially if the damage is incidental.

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But…Why? And Is It the Same for Home and Renters Insurance?

The purpose of a deductible is to keep individuals from filing insurance claims for every paint chip they get on their car.

Let’s face it; we’d probably all be at the auto shop a lot more often if our car insurance company agreed to pay every last penny for each dent, ding and scratch on our car.

Using the same line of thinking, if we satisfied our deductible after our first accident during a particular policy period, what would stop us from filing “nick-knack” claims for the rest of the year? The answer is not a thing.

Unfortunately, the same goes for homeowners and renters insurance. Your deductible will be applied against all real property insurance claims you file within a particular policy period.

The rationale is the same as described in the auto deductible section above. The only difference is; the stakes are much higher (in the form of money) when you’re dealing with houses!

Are There Any Exceptions?

While not technically an exception to the property deductible, there are situations where damage can occur and your payout will not be reduced by your deductible amount.

This typically occurs when ensuing damage, related to the original claim, is discovered after the original claim is closed.

A very straightforward example would be discovering a small patch of mold in your home just weeks after a claim for water damage has been closed. More often than not, the mold is a result of the original water damage not being properly remediated.

In this instance, if you have proper mold coverage on your property policy, your insurer would not hit you for a second deductible, rather just reopen the original claim and make the necessary repairs.

Going another direction completely, commercial general liability insurance policies offer a “claims made” and “occurrence” deductible in some instances. We should first point out that this is a liability policy and not a property policy, so this topic is only loosely related.

The two options are important based on the type of company you run, if for instance, 200 people sue you for a faulty product. If you had a $5,000 deductible per “claim made” you might as well pack it up and go home.

In this example you would want an “occurrence” deductible because the faulty product would be considered one occurrence and you’d only be subject to one deductible.

At the end of the day, insurance exists to buffer your exposure to accidents and other misfortune, not completely remove it. This is why deductibles are in place.

Read more: Will my insurance go up if I file a claim?

(photo: Garrette)