Close-up of a note on a laptop saying “Understanding the Deductible”

Landlord Insurance Policy Deductibles Explained

Sep 14 2021

Landlord insurance offers a wide range of benefits for landlords of residential or commercial spaces. This kind of commercial insurance provides protection for the structure, or space itself, the contents of the space, income protection in case of business interruption, and of course, liability protection. 

As with nearly all kinds of insurance, landlord insurance offers what’s known as deductibles. This is the amount that the insured is obligated to pay before coverage starts. There are advantages to having either low or high landlord insurance deductibles, which we will discuss later on. 

Welcome to our complete guide on landlord insurance deductibles! Let’s begin. 

Road signs representing the choice between high deductibles or high premiums

What are Landlord Insurance Deductibles? 

For those who are not yet too familiar with insurance terms, a deductible is the amount of money that you will pay out of pocket before the insurance company or insurance provider starts paying for a claim. Set at the beginning, nearly all types of insurance plans have this agreed amount.

Why Are Landlord Insurance Deductibles Important? 

For anyone who is new to insurance, deductibles may seem like a counter-intuitive part of it. However, it couldn’t be farther from the truth. Deductibles give mutual advantages for both the insurance company and the insured. 

In this article, we are specifically talking about landlord insurance deductibles but in principle, the advantages of deductibles remain the same for virtually all types of insurance.

1. Lowering the Cost of Insurance 

The primary advantage of having landlord insurance deductibles is that it lowers the cost of the insurance or the monthly premium. The higher the deductibles are, the lower the premium will be. This means having a higher deductible is a great way to lower your landlord insurance cost.   

2. Giving Insured Individuals and Businesses A Choice 

Not all landlord insurance deductibles are the same. Some landlord insurance plans have higher deductibles and some have lower. The advantage here is that individuals and businesses get to have a choice whether: 

  • To cover more of the minor costs and save on the premium or;
  • To cover less of the minor costs and agree to a higher premium. 

At the end of the day, no choice outweighs the other and it’s all a matter of individual needs and preferences. 

3. Making Insurance Accessible For All 

Without deductibles, landlords lose a parameter for customizing their insurance. This translates to all landlord insurance being more costly than they are now. 

With higher premiums for all, and with no option to decrease the premium through deductibles, landlord insurance would become less accessible for small-scale rental property owners or those who are just starting out. This turns out to be unfortunate, as small businesses and new businesses are in even greater need of adequate insurance. 

4. Maintaining a Beneficial Balance For Everyone 

The main goal of any kind of commercial insurance is to make sure that the insured is protected from any debilitating and sudden loss. Losses could bring the business to a grinding halt or in some cases, even force the business to close.

Landlords, like other business owners, are faced with numerous risks. For them, landlord insurance truly comes in handy in dire situations such as:

  • Destruction to the rental property, making the property uninhabitable until repaired
  • A natural disaster making the rental property inaccessible for a time, forcing tenants out
  • Landlord liability ending up in a lawsuit where the landlord is compelled to defend themselves
  • Business interruption for the landlord because of property destruction

With deductibles in place, insurance companies are better able to prioritize larger needs, such as the ones listed above, because clients (who choose to) can cover minor claims while also receiving an incentive (i.e. lowered premiums) for it.

A cropped image of a landlord computing for landlord insurance deductibles

Types of Landlord Insurance Deductibles, with Examples 

In general, there are a number of ways that an insurance deductible can be expressed. But before we continue, let’s talk briefly about the nature of landlord insurance. 

Personalized landlord insurance, such as the one offered by KASE Insurance, is unique in the sense that it acts like property insurance (along with the business interruption coverage) while also addressing some landlord liabilities

Though landlord insurance plans differ in scope, depending on the provider, the best landlord insurance plans should give you the above coverage points. This is important to note because the examples we will discuss below go into these coverage points.  

Landlord deductibles can take the form of the following: 

1. Percentage Deductibles 

Though this can vary depending on insurance providers, percentage deductibles are used for massive perils that lead to large amounts of financial loss. 

A few examples include damage to the rental property because of earthquakes, hurricanes, or windstorms. Note that not all landlord insurance plans cover all these perils by default - some perils have to be added by customizing your landlord insurance.   

So for example, your rental property suffers earthquake damage amounting to $200,000 and earthquakes are a covered peril. To compute the actual amount that’s covered, simply refer to your deductible. If it’s 10%, then that means that you will pay a $20,000 deductible while the insurance company will cover the remaining $180,000. 

2. Flat Deductibles 

For damages to rental properties like fire, vandalism, and so on, typically flat deductibles are used. But again, this still depends on the insurance provider. Flat deductibles work quite similarly to percentage deductibles but instead of a percentage, the business owner pays a fixed amount. 

For example, you sustained $10,000 worth of damage due to a fire in your rental property and fire is a covered peril. If you have a deductible of $2000, then that means you only pay $2000 while your insurance provider pays for the remaining $8000.  

3. Waiting Periods 

Waiting periods are a form of deductibles that are usually applied to business interruption income protection. This means that a certain amount of time would first pass before income protection is triggered in your policy. 

So for example, your rental property sustained fire damage and your property becomes uninhabitable for a few weeks. If your waiting period is 3 days, it means that lost income will only be reimbursed after those 3 days have passed (with the 3 days excluded). 

4. Aggregate Loss 

Though uncommon, this may be present in some landlord insurance policies. With this type of deductible, you would first need to pay a certain amount for sustained loss/damage, within a certain time frame, before insurance takes over.  

For example, you have an aggregate deductible of $10,000 for each year. You already shelled out $2000 for an act of vandalism and $8000 for fire damage. Later in the same year, your property was vandalized again. Because you already paid the entire aggregate deductible, this and other covered losses for the year will be paid fully by the insurance company. 

Personalized Landlord Insurance Just For You 

The main advantage of getting personalized landlord insurance is you can get the exact kind/amount of coverage along with the landlord insurance deductibles amount that fits your needs the best. You get all this, minus the costly unnecessary riders - so you can save in the long run.

At KASE Insurance, take the benefits of personalized landlord insurance a step further. We treat our clients as our partners. Hence, we will give our full assistance from negotiating premiums to helping with your claims. No matter what commercial insurance needs you have, our award-winning team is here to help you through it all. 

Get started by contacting KASE Insurance today!

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