What Does Straight Deductible Clause Mean?
A straight deductible clause is section in an insurance policy that specifies the amount in dollars or percentage of a loss that you have to pay for each loss before the insurance company covers the remaining costs. It is common in property and medical insurance policies for which you pay the first portion of any loss.
Insuranceopedia Explains Straight Deductible Clause
For instance, let's say your homeowners insurance includes a $1,000 straight deductible clause. This means, every time your home suffers damage covered in the policy, you would need to pay up to $1,000 before the insurance company pays. In case of fire damage of $900 and flood damage of $1,500 a month later, you would have to pay $900 and $1,000 respectively, with the insurance company paying $500 in the second instance.
On the other hand, some policies use an aggregate deductible system. This means that all the deductibles you pay throughout the year add up. Once you have paid up to the specified amount, the insurance company covers insured damages for the rest of the year.
Policies that have a straight deductible system tend to charge a smaller deductible as you may end up paying it more often, while an aggregate deductible system likely charges a higher deductible because after a certain point, you no longer have to pay it.