Every business needs property insurance because of the critical assistance it will provide following damaging events like fires, severe weather or vandalism. With it, you will be able to repair or replace damaged items without a significant blow to your company’s financial reserves.
Though your property coverage can reduce your overall financial responsibility for a repair bill, it is not a guarantee that you will receive compensation for 100% of the value of a lost item. So, even when your policy pays, there will often be residual recovery costs, due partly to the deductibles listed on the plan.
Deductibles are direct representatives of how much of the cost of property damage you will agree to pay yourself. You can often use them to save money on your insurance if you do so correctly. Here’s how they work.
What are Property Insurance Deductibles?
Commercial property insurance is designed to help you repair or replace business property following unexpected hazards. The policy will contain limits on how much it will pay you for a loss, and a deductible will likely be one of them.
When you file a claim on your policy, your insurer will calculate the dollar amount of damage that you sustained. They will then review your policy to see how much they will compensate you based on the terms of the plan. If the terms include a deductible, then the insurer will deduct the deductible value from your settlement. By choosing a deductible for this coverage, you have agreed to pay for this cost of damage yourself, and free your insurer from the obligation.
How do they work?
Suppose that you experience a fire in your business, and your insurer estimates the cost of your damage to be $5,250. On your property insurance plan, there is a $1,000 deductible.
In this situation, your insurer will only pay you $4,250 as a settlement, rather than the $5,250. They subtracted the $1,000 deductible from your settlement since you agreed to pay for damage up to that value by yourself.
It’s important that you choose a deductible on your plan that you can afford to pay out of pocket for any property damage claim. After all, any damage cost that falls below the value of your deductible will not have coverage under your property coverage. Therefore, this will be a cost that your business must bear, and you don’t want to face an unaffordable cost burden just because your deductible is higher than you can afford.
Your commercial property insurance agent is happy to help you choose the deductible that will offer you the most affordability, but also balance your premiums. Sometimes, by choosing a higher deductible, you will be able to qualify for a reduced premium. We’ll make sure you don’t overshoot the mark.