When an Insurance Deductible Hurts: Don’t Miss This

So you think you have your commercial insurance covered, right? If you are like me, you think your insurance deductible is easily managed. What if your commercial insurance doesn’t factor the Exponential Effect?

Can Your Insurance Deductible Compound and Hurt You?

What An Insurance Broker MUST Do For You
As insurance brokers, we protect your position. You are our clients and we are with you when we build your insurance policy and we are there during the claims process. When we review Liability terms from the numerous Insurer markets we touch, it is extremely important for us to examine the type of deductible that will apply for each and every one of our clients.

In one instance, our office had received terms on a prospect from CFC Underwriting, where the deductible – the amount you would have to pay out before an insurance claim was paid – was quoted as “Each and Every Claim, Including Costs and Expenses”.

This type of insurance deductible is rarely seen, most of us insurance brokers are used to “Per Occurrence / Per Accident” deductibles.  We had a quick discussion with some of staff and quickly realized that many of them view the terms as interchangeable, not knowing the significant difference in how they would be applied. Actually, Google the term and you’ll see its a common occurrence. We did not screw up on the term, internally, we were debating its significance. And THIS MATTERS TO YOU.

Here’s Where Your Insurance Deductible Can Get Bad

On a ‘Per Claim Deductible’ “Each and Every Claim” applies to all damages sustained by any one person or organization as a result of one occurrence (i.e. five people make claims against the Insured for Bodily Injury / Property Damage incurred in one occurrence.  The deductible applies separately to each person’s claim).

Making Sense of It
Here’s an interesting example, a completely different case: the company performs spray painting operations, and there could be winds that kick up,  overspray occurs, and 10 cars in the parking lot  have a new set of colors than the original dealer color. If a $10,000 per claim  deductible applies, you will have 10 separate deductibles, totalling $100,000.  We could show you an endorsement from Aviva where the claim deductible endorsement is still applicable on certain operations.

A Better Solution
Whereas Per Accident / Per Occurrence Deductible applies only once to the total of all claims paid arising out of the one accident or occurrence (i.e. for the examples above, only one deductible would apply instead of a deductible applying to each claim).

So what kind of wording is in your insurance policy? Its this that makes a difference when you’re checking or planning your insurance coverage.

There are cases where a Per Claim Insurance Deductible could be acceptable, but this should be  based on the Insured’s operations and requires careful consideration.  We suggest that when presenting this deductible structure to make sure your Insured is aware of how the semantics work in a claims scenario, and the possible consequences

Have something to add or an insurance question to ask? We’re always here to help, be heroes or walk forward with you. What’s your question or comment?