Split Deductible

What Does Split Deductible Mean?

A split deductible is a type of deductible in an insurance policy that is paid differently depending on the specific peril or loss. This form of deductible payment is not mandatory for all insurance policies but is instead selected by the policyholder. Split deductibles show up most often in homeowners policies, where wind or hurricane losses are handled as a percentage while other damage falls under a flat amount, so the deductible structure is worth comparing when you shop the best homeowners insurance companies.

Insuranceopedia Explains Split Deductible

Split deductibles are easier to understand when compared to the alternatives: flat amount deductibles and percentage deductibles.

A flat amount deductible specifies a fixed amount that the policyholder must pay before the insurance coverage applies. For instance, if the policy requires a $100 deductible, the policyholder pays $100 out of pocket for a loss before the insurer begins to cover the remaining costs.

A percentage deductible, on the other hand, is calculated as a specified percentage of the loss. For example, if the loss is $1,000 and the deductible is 1%, the policyholder must pay $10 before the insurance coverage takes effect. Because a 1% deductible on a $300,000 home works out to $3,000, a higher percentage deductible can keep your premium lower, which is part of why average homeowners insurance costs vary so much between policies.

A split deductible combines these two approaches, applying different types of deductibles based on the cause of the loss. For example, damage caused by fire might require a flat amount deductible, whereas damage caused by vandalism could involve a percentage deductible based on the total loss. Thinking through this same trade-off between premium savings and out-of-pocket risk is also why it pays to consider whether to raise your auto insurance deductible before renewal.