Personal Liability Insurance: What Happens When Someone Gets Hurt on Your Property

When choosing an insurance policy, most people are familiar with  flat-rate deductibles  (e.g., $500 or $1,000). However, some policies use a  percentage-based deductible  instead. This means your  out-of-pocket cost  isn’t a fixed amount but a percentage of your  coverage limit .

This type of deductible is common in  homeowners insurance , especially in areas prone to  hurricanes, windstorms, and earthquakes .

A  percentage-based deductible  is calculated using a set percentage of your  total coverage limit , not the amount of damage.

For example:

• You have a  home insurance policy  with a  coverage limit of $300,000 .
• Your deductible is  2% of the coverage limit .
• If you file a claim, your out-of-pocket cost would be:

$300,000 x 2% = $6,000 deductible

So, if your home has  $15,000 in storm damage , you’d pay  $6,000 , and insurance would cover the remaining  $9,000 .

Insurance companies use these deductibles to:
✔  Reduce overall claim costs  💵
✔  Encourage policyholders to maintain their property  🛠️
✔  Adjust risk in high-risk areas  🌪️

Percentage-based deductibles are most common in:

• Hurricane-prone states  (e.g., Florida, Texas, Louisiana) 🌊
• Tornado-prone areas  (e.g., Midwest states) 🌪️
• Earthquake coverage  (e.g., California) 🌍

👉  If you have a high-value property, a percentage-based deductible could mean a much larger out-of-pocket expense.  Always calculate potential costs before choosing a policy.

To avoid large unexpected costs, consider:

• Choosing a policy with a cap on percentage deductibles  🏠
• Setting aside emergency funds  💰
• Reviewing your deductible options with your agent  📞

While percentage-based deductibles  can lower your premium , they can also mean  higher costs after a disaster . Understanding  how much you might pay out of pocket  can help you make an informed decision.

📌  Need help choosing the right deductible? Contact your insurance provider for a personalized review.

• What You Need to Know About Home Insurance Deductibles (III)
• FEMA: How to Prepare for Storm Damage Costs
• Compare Home Insurance Deductibles (NerdWallet)

Would you like  help reviewing your current policy?  Our team at Vargas & Vargas Insurance ia always ready to be of help, you can reach our team at 617-298-0655.