Rising property insurance premiums in wind- and hail-prone areas have increased interest in wind deductible buyback (WDBB) insurance. Available as a stand-alone policy that complements primary property insurance, WDBB insurance lets you reduce the deductible for wind and hail damage on your personal or commercial property insurance. It can lower your deductible by as much as a few percentage points.

For both homeowners and business owners, the primary property policy deductible is often a fixed dollar amount, such as $1,000, $5,000 or more. This is the amount you must pay before your insurance company will begin covering any repair or replacement costs.

But in some regions, a completely different deductible applies to wind and hail damage. Instead of being a fixed dollar amount, these wind or hail deductibles are assigned as a percentage of the total property value. As an example:

 In this scenario, the property owner would be responsible for all wind and hail damage up to $37,500. The insurance company would only begin paying for outstanding balances after the policyholder had paid that amount.

For many homeowners and businesses, this deductible could be considered excessive and risky, especially if their property is in an area where severe weather is common. A WDBB policy can reduce that financial risk.

How much is wind and hail deductible buyback insurance?

Let’s go back to the example property valued at $750,000 with a $37,500 wind and hail deductible. If a proposed WDBB policy covered 4% of the property value assigned to the deductible, that would lower the total wind and hail deductible by $30,000 (4% of $750,000). That would leave just $7,500 ($37,500-$30,000) for the insured to pay on a wind and hail claim before the insurance company would begin covering expenses.

Of course, the higher the property value, the higher the initial wind and hail deductible — and the higher the premium for a WDBB policy. Using your valuations and property policy, your insurance professional can help you complete an accurate cost-benefit analysis to see if a buyback policy is right for you.

There are some basics of these policies you should understand:

• WDBB premiums will be higher in areas with more severe weather risks.
• Wind and hail deductibles are not the same as hurricane deductibles (which are also set individually).
• Damage caused by hurricane winds requires hurricane coverage, Your WDBB policy and wind and hail deductible would not apply.

What are the other benefits of a WDBB policy?

A WDBB policy allows you to use the capital that would otherwise be tied up in reserve. It may also improve your financial picture for lenders and investors so you can secure the loan or refinancing you want.

Some lenders attach maximum allowable deductible levels to their loan agreements. If your wind and hail deductible grows above this amount, a WDBB can bring it back in line with your lending contract.

If you insure property in a zone prone to hail or wind damage and your property insurance has a substantial deductible for that damage, a WDBB policy may be a good option. Ask your Rathbun insurance account manager about the potential savings.