What Is a Buyback Deductible?
A buyback deductible is a premium that an insured party pays to reduce or eliminate the deductible paid in the event of a loss. An insured party can add buyback deductible coverage to an existing insurance policy, or it can be a separate policy with a company that pays the deductible from a loss. This type of policy can benefit individuals and businesses who might suffer hardship from paying an insurance deductible.
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Definition
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When a loss like an accident or property damage occurs, the insured must normally pay a predetermined amount of money to get the claim paid. This can sometimes be more than the insured can afford. A buyback deductible is a clause in an insurance policy that protects the insured party against paying high deductibles in the event of a loss. When using a buyback deductible, the insured pays a higher premium in exchange for partial or complete coverage of the deductible when a loss occurs.
Types
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Buyback deductibles are most common on commercial truck insurance and home and business property insurance. Like other types of insurance, a buyback deductible is a form of risk management that protects the insured from unexpected losses from liability and property damage. Though a deductible buyback is most common on homeowners' policies, it can also be found on some life insurance policies or auto insurance policies, especially those held by businesses.
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Benefits
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This variation in an insurance policy can be applied to the deductible for specific types of damage; for instance, a homeowner with a buyback deductible for wind damage would not be covered by the buyback deductible for other types of loss or damage to the building. This type of coverage benefits those who face high deductibles for damage that is likely to occur. It helps those who may not have the accessible cash on hand to pay their insurance policy deductibles.
Business Buyback
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Businesses also use this type of policy to insure assets like buildings and company vehicles. A buyback deductible is particularly beneficial when insuring against a loss that might cost the insured more than one deductible, such as an auto accident involving more than one person.
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