New York Subscriber

The deductible on a first-party policy, such as a builders risk, is a way to make the insured share in the loss and to decrease small, nuisance claims. The builders risk policy is written for the benefit of the owner of the project. If that is the municipality, or if the municipality is fronting the money for the project and that is its insurable interest, then the municipality (as named insured) might have to share in the loss by reimbursing the carrier for the deductible if the contractor is bankrupt. Likewise, in smaller claims that fall within the deductible, if the contractor cannot pay the loss the owner or financier may just not be able to collect the damages.

Deductibles often reflect the value of the property and the financial size of the insured buying the insurance. Smaller companies typically purchase lower deductibles. It is not uncommon to see deductibles of $500 or $1,000 per building. However, companies that have many properties or contractors that insure many projects under one policy may opt for much higher deductibles. Typically the value of the buildings and the amount the insured can comfortably retain are factors in this decision.