Why Are These Policies Becoming More Common?
Insurance carriers are increasingly shifting more financial responsibility onto policyholders—especially for claims that are unpredictable and costly, like wind and hail damage.
In the past, wind and hail deductibles were often around 1%. Today, it’s much more common to see deductibles in the 2%–5% range.
It’s important to understand what that actually means. This percentage is based on the total insured value of your property—such as your building, business personal property, and sometimes even business income—not a percentage of the claim itself (a very common misconception).
How Do These Policies Work in Practice?
A wind/hail buy-back policy is designed to help cover the large deductible your primary property insurer requires.
Think of it as a financial buffer—it bridges the gap between the deductible you’re comfortable paying and the higher deductible your insurer mandates.
Example:
Building Insured Value: $2,500,000
Wind/Hail Deductible: 2% ($50,000)
Wind Damage Claim: $200,000
Insurance Company Pays: $150,000
Your Out-of-Pocket Cost: $50,000
What’s the Solution? Buy Back the Deductible
A wind/hail buy-back policy allows you to lower your effective out-of-pocket cost.
You choose a deductible level you’re more comfortable with—say, $10,000 per occurrence—and the policy covers the difference.
The premium is based on how much the buy-back insurer may need to pay. In this case, they’re covering the gap between the $50,000 deductible and your chosen $10,000 retention.
Updated Example with Buy-Back Coverage:
Building Insured Value: $2,500,000
Wind/Hail Deductible: 2% ($50,000)
Wind Damage Claim: $200,000
Insurance Company Pays: $150,000
Buy-Back Policy Pays: $40,000
Your Out-of-Pocket Cost: $10,000
In short, as deductibles continue to rise, buy-back policies are becoming a practical way for businesses to manage risk and maintain predictable costs.
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