Insurance Deductibles and Why They Matter

Your insurance deductible is the amount you must pay before your insurance company pays for damages. If your deductible is $500 and the damage is $1000 – you would pay $500 and your insurance company would pay $500. Generally, deductibles and premiums are inverse. The higher your deductible, the lower your premiums. Knowing that, it’s important to learn where your risks might be on a particular project.

For example, if you have a single family rental you’re renovating and the inspection was clean and it’s a quick turn-around to complete and rent out, it might make more sense to lower your premium and raise your deductible because you are unlikely to have any insurance claims on this project. On the other hand, for a vacant home with a longer timeline, you might be more likely to see theft, vandalism and accidents on the job site so it might be smart to raise your premium and lower your deductible so you don’t get hit with a large out of pocket expense during a long project.