Deductible
A deductible is the fixed dollar amount or percentage the policyholder pays out of pocket before insurance coverage applies. The deductible is subtracted from the first ACV payment, not from the depreciation release.
The Homeowner's Out-of-Pocket Responsibility
The deductible is the fixed dollar amount or percentage the policyholder pays out of pocket before insurance coverage applies, and it is the single number that determines whether a homeowner moves forward with repairs or walks away. On most homeowner's policies, the deductible is subtracted from the first ACV payment - not from the total claim, and not from the depreciation release. Understanding exactly when and how the deductible applies prevents the most common financial surprises on a claim.
Before you sign a contract with any homeowner, know their deductible. Before you set expectations, do the math.
How the Deductible Affects the First Check
The first payment the homeowner receives is ACV minus the deductible. Here is the math on a typical residential roof claim:
| Item | Amount |
|---|---|
| Replacement cost value (RCV) | $18,000 |
| Depreciation (40%) | -$7,200 |
| Actual cash value | $10,800 |
| Deductible | -$2,500 |
| First check | $8,300 |
That $8,300 is what the homeowner has in hand before any work starts. The remaining $7,200 comes as recoverable depreciation after repairs are completed. The homeowner is responsible for paying the $2,500 deductible to the contractor directly.
Never Waive the Deductible
Waiving or absorbing the homeowner's deductible is illegal in most states. It is considered insurance fraud because the contractor is effectively inflating the claim to cover the homeowner's responsibility. Some contractors advertise "we pay your deductible" as a sales tactic. This is a red flag for carriers and can result in claim denial, contractor license revocation, and criminal charges.
The deductible is the homeowner's cost. Period. If the homeowner cannot afford the deductible, they need to know that before work begins, not after.
Percentage-Based Deductibles in Storm-Prone States
In hurricane and hail-prone states, many policies have percentage-based deductibles instead of flat amounts. A 2% wind/hail deductible on a $300,000 dwelling policy means the homeowner owes $6,000 before insurance pays anything. That is significantly higher than a standard $1,000 or $2,500 flat deductible.
Check the declarations page for deductible type. If the homeowner has a percentage-based deductible, the dwelling coverage amount determines the actual dollar figure. Contractors working in storm-prone markets need to have this conversation with every homeowner early in the claims process, because a $6,000 surprise deductible kills deals.
Further reading
Frequently asked questions
The deductible is subtracted from the first ACV payment, not from the depreciation release. On an $18,000 roof replacement with a $2,500 deductible and $7,000 in depreciation, the first check is $8,500 (ACV minus deductible).
Waiving or absorbing the deductible is illegal in most states. It is considered insurance fraud because the contractor is inflating the claim to cover the homeowner's out-of-pocket cost. The deductible is the homeowner's responsibility.
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