Straight Deductible Clause

What Does Straight Deductible Clause Mean?

A straight deductible clause is a section in an insurance policy that specifies the dollar amount or percentage of a loss you must pay for each claim before the insurance company covers the remaining costs. This clause is common in property and medical insurance policies, requiring you to cover the initial portion of any loss.

Insuranceopedia Explains Straight Deductible Clause

For example, suppose your homeowners’ insurance includes a $1,000 straight deductible clause. This means that whenever your home sustains damage covered by the policy, you must pay up to $1,000 before the insurance company contributes. If you experience fire damage costing $900 and flood damage amounting to $1,500 a month later, you would pay $900 for the first claim and $1,000 for the second, with the insurance company covering $500 in the latter case.

In contrast, some policies operate on an aggregate deductible system. Under this approach, all deductibles paid over the course of the year accumulate. Once your total payments reach the specified limit, the insurance company covers all insured damages for the remainder of the year.

Policies with a straight deductible system often have lower deductible amounts, as you may need to pay them more frequently. Conversely, an aggregate deductible system typically involves a higher deductible, but once the threshold is reached, no further payments are required for the rest of the coverage period.