How High Deductibles Can Leave Property Owners Without Real Coverage
In any insurance policy, it’s a given that you will have a deductible. While many assume the amount they would have to pay is reasonable, that’s not always the case. With the rise of exclusions and higher deductibles, it’s becoming more common for property owners to be left without any substantial coverage.
According to a study conducted by LendingTree, insurance rates climbed 40.4% cumulatively across the U.S. over the past six years. Now imagine having a high deductible on top of paying high premiums.
Property Owner Sees Extreme Weather
In June of 2021, the travelers staying at the Ramada Inn & Suites in Colorado spent their afternoon listening to the loud rumbles of thunder and the thudding of one-inch hailstones pelting their hotel’s metal roof. Not an ideal vacation activity, but for the owners of the Ramada, it was common for this time of year to receive the heavy precipitation.
Months passed, guests came and went, and the property survived other storms, unaware of the impact the June storm had on its roof. Fast forward to March 2022, after experiencing some interior leaks, the property owners called a contractor to inspect the property.
It was evident to the seasoned roofer that the leaking was not caused by typical wear and tear. Premier Claims had a prior working relationship with the contractor, so when it became clear to him that this wasn’t going to be a simple roof replacement claim, he contacted us.
The Investigation: Identifying Hail Damage and Finding The Date of Loss
The first step in our process focused on collecting evidence to build out the foundation of the claim. We began by scheduling and completing a scope inspection to get a better grasp of the damaged area. Then, we analyzed the type of damage, measured the hail hits, and used historical evidence to determine when the initial damage occurred. Ultimately, we were able to narrow the date of loss to a major hailstorm on June 13th.
With evidence of the damage and a correctly identified proof of loss, our team of legal professionals analyzed the policy to make a proper coverage determination. While cosmetic exclusions are becoming more common in many commercial policies, this policy did not have a cosmetic exclusion.
Generally speaking, a cosmetic exclusion excludes coverage for parts of the structure deemed to have no function beyond the property’s overall appearance. This exclusion is a common argument used by the carrier to reject a claim, and may require a specialist with an engineering, construction, and/or insurance background to provide evidence of functional damage to the structure.
At this point, the lack of a cosmetic exclusion led us to believe the policyholder had excellent coverage. Unfortunately, the policy had an endorsement that impacted the property owners’ coverage and financial risk.
High Deductible: The Claim Killer Endorsement
The policy contained a wind and hail 5% deductible endorsement on the whole structure, not just the damaged areas. While the policy covered up to $5 million in damage, it had a 5% deductible that needed to be paid out first. We determined that replacing the roof would cost $264,000. However, because the policy’s endorsement included a $250,000 deductible, the loss was effectively reduced to a claimable amount of only $14,000. Given today’s rising insurance premiums and the increasing selectiveness of carriers when choosing which properties to insure, filing a claim for this loss could negatively impact the future insurability of the property owners. In many cases, submitting a claim of this size may lead to higher rates, potential non-renewal, or difficulty securing coverage in the future.
Basically, the policy protected the property if it was destroyed. If the property were only partially damaged, like the roof currently is, it would cost the policyholder essentially the same out-of-pocket cost with or without filing a claim.
For cases like this one, we connected the policyholder with one of our trusted brokers to get new coverage. While the policyholder had to pay out of pocket for this claim, we can better prepare them for the next time their property sustains damage.
We highly recommend that every policyholder get a professional third party, like Premier Claims, to perform a policy review before signing a new policy. The fact of the matter is, carriers are creating policies with more complex and nuanced language, which can be challenging to interpret if you don’t speak fluent insurance.
Costs Are Trending Up, but Coverage Is Trending Down
As costs continue to climb across every industry, more policies are quietly shifting risk back onto property owners through higher deductibles or reduced coverage limits. What may look like a premium staying steady can, in reality, mean less protection when it matters most.
Our Senior Adjuster, Mikayla Ross, explained, “It’s truly unfortunate that most owners aren’t aware of these changes. They’re just grateful their premiums didn’t go up and don’t realize the fine print may have changed what their policy actually covers during their renewal.”
How Property Owners Can Protect Themselves
The good news? You can help prevent this from happening with a few proactive steps:
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Request Your Full Policy — Not Just the Declarations Page.
The declarations page is only a summary. The endorsements and exclusions that really matter are buried deeper in the policy.
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Review Endorsements Annually.
Ask your agent or an independent claims professional to identify any endorsements that raise your deductible or exclude common local perils (like wind or hail).
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Match Coverage to Location.
Properties in storm-prone areas need policy structures that reflect real regional risks. A “one-size-fits-all” policy rarely protects your assets effectively.
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Schedule a Policy Review with an Expert.
Premier Claims can help identify gaps or endorsements that could hurt you before a loss occurs — and connect you with the right professionals to adjust coverage appropriately.
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