THINKING AHEAD would mean the homeowner pays $ 6,000 before insurance kicks in .
• For commercial properties , the stakes are even higher :
• A 5 % deductible on a $ 5 million building amounts to $ 250,000 — a substantial financial burden many business owners might not anticipate .
Many property owners mistakenly believe the deductible applies to the value of the claim . For example , they might assume they ’ ll pay 2 % of a $ 50,000 roof repair , or $ 1,000 , rather than realizing the percentage deductible is based on the property ’ s total insured value and not a percentage of the amount of the claim . This misunderstanding can lead to severe financial strain in the event of a major loss .
COMMON POLICY SURPRISES TO WATCH FOR
In addition to changes in roof coverage and deductibles , property owners should be aware of other policy nuances that could impact their financial protection :
1 . Depreciation Schedules : Many policies now include depreciation schedules for roofs and other property components . These schedules specify how much value is deducted annually based on the age and condition of the property . As a result , older features may leave property owners covering significant out-of-pocket costs even if they are insured .
2 . Exclusions For Certain Perils : Depending on your location , some policies may exclude coverage for common risks like flooding , earthquakes , or mold . These exclusions require separate policies , such as flood insurance , to ensure full protection . For example , properties in highrisk flood zones may require both standard and excess flood insurance to avoid major financial losses .
3 . Matching Endorsements : Homeowners may find that damaged materials , such as roof shingles or siding , are replaced with mismatched materials unless a matching endorsement is included . This can lead to unexpected repair costs and aesthetic concerns . Without this endorsement , a partial repair could leave your property looking inconsistent and potentially reduce its value .
4 . Renewal Adjustments : Policy terms and deductibles can change during renewal periods , often without clear communication . It ’ s essential to review your renewal paperwork closely and ask your agent for clarification . Look for changes to key elements like deductibles or exclusions , as these adjustments can significantly alter your coverage .
WHY ARE THESE CHANGES HAPPENING ?
The shift toward percentage-based deductibles and depreciation-based coverage is largely driven by rising insurance costs and evolving risk management strategies within the industry . For decades , flat-dollar deductibles were the norm , offering property owners a predictable , straightforward amount to pay in the event of a claim .
However , in recent years , many insurers have adopted percentagebased deductibles , tying a homeowner ’ s financial responsibility to the insured value of their property rather than a fixed amount .
This change is particularly prevalent in states like Texas , where percentage-based deductibles have become almost universal . While this model can reduce premiums for some homeowners , it often results in significantly higher out-of-pocket expenses for others — particularly after catastrophic events like hailstorms or hurricanes .
Below are several factors contributing to these changes :
• Increased Weather-Related Claims : Severe weather events — including hurricanes , tornadoes , and hailstorms — are becoming more frequent and costly . In 2023 alone , the US insurance industry faced $ 60 billion in losses from severe storms . These escalating losses are pushing insurers to shift more financial responsibility onto policyholders through mechanisms like higher deductibles and stricter coverage terms .
• Inflation And Rising Repair Costs : The cost of labor and materials has surged in recent years , making repairs and replacements significantly more expensive . As a result , property owners may face policies with limited coverage or higher premiums as insurers adjust to account for inflationary pressures .
• Geographic Risk Assessments : Properties in high-risk areas , such as coastal regions or tornado-prone states , are more likely to experience changes in coverage terms . Insurers are using advanced mapping tools to identify and adjust for these risks . This often means that homes in these areas face exclusions , higher deductibles , or premium increases to offset the elevated exposure .
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