What is a flood insurance deductible and how does it work?

Like most other insurance products, your flood insurance has a deductible as part of the policy. But what exactly is a deductible? According to the Insurance Information Institute a deductible is defined as:              “An amount of money that you yourself are responsible for paying toward an insured loss. When a disaster strikes your home or you have a car accident, the amount of the deductible is subtracted, or ‘deducted,’ from your claim payment.” So, what is the right deductible amount for you? A few things to keep in mind when selecting your deductible amount:
  • The higher the deductible you select the lower the premium will be, and vice versa. The idea here is a cost savings for taking on more risk in the event of a loss. By having a higher deductible, insurance companies can charge policyholders less premium.
  • Everyone loves lower annual insurance premiums, but it is important to balance that benefit with the out of pocket expense if a loss were to occur. The premium associated with a $10,000 deductible might look great on paper, but if a flood occurs and causes damage, can you really afford a $10,000 deductible? It is important to think about short term cost savings benefits versus long term risk.
Here is an example of the difference a deductible change can make with a TypTap flood policy. The two quotes below are identical, except for the deductible amount. Another very important thing to keep in mind when it comes to flood insurance: typically, there are TWO deductibles; one for building and one for personal property. So, if you have a loss that damages both the building and contents within the home you will have a deductible apply to both claim payments. Example: $50,000 in building damage, less a $5,000 deductible = $45,000 claim payout. $10,000 in contents damage, less a $5,000 deductible = $5,000 claim payout. In this example the insured would receive a total of $50,000 for their loss. Remember though – TypTap offers replacement cost coverage for contents as an available endorsement, so make sure to speak with your agent about all your coverage options! For more information and for a flood quote in seconds, policy in minutes please visit www.typtap.com.