A deductible is a specified dollar amount or percentage that a policyholder must cover before the insurance company pays for a loss. It serves as a cost-sharing mechanism that discourages small, frequent claims and lowers premium costs.
How It Applies to Florida Landlords
In Florida, property insurance often includes two types of deductibles: standard and hurricane. Because Florida is prone to tropical storms, many policies mandate a separate, higher deductible specifically for windstorm or hurricane damage, which is typically calculated as a percentage of the total insured value (often 2%, 5%, or 10%). Landlords must understand how these deductibles impact their cash flow; during a major storm, a 5% deductible on a $500,000 property could mean $25,000 in out-of-pocket costs before repairs are covered.
Key Takeaways
- Check your policy for specific hurricane versus standard deductibles.
- Ensure you have sufficient cash reserves to cover your deductible.
- Higher deductibles can significantly reduce monthly insurance premiums.
- Always verify if the deductible applies to the total dwelling value or the claim amount.