When obtaining quotes for your Professional Liability policy it is important to know all of the factors that will affect your firm at the time of a claim. One of those significant factors is First Dollar deductible vs. Straight deductible.
When a claim is opened there are claims expenses that may begin for the insurance carrier to provide the proper defense for your firm. First Dollar deductible is also known as ‘damages only’ deductible. In essence your firm is responsible for the deductible in the event that there are damages paid or a settlement not the expenses to defend.
Conversely, with the Straight deductible your firm is responsible for the defense costs up to the deductible as soon as claim is opened. The Straight deductible option is also known as the ‘expenses and damages’ deductible.
The option for the First Dollar deductible will depend on the insurance carrier quoting the Professional Liability renewal and on the size of your firm. Most small firms that are claims free are offered the First Dollar deductible in the event that the insurance carrier does have the First Dollar deductible option available.
Some small firm insurance carriers will offer a $0 deductible in which case the insured does not pay a deductible even if there are expenses, damages or settlement paid. In this situation the First Dollar or Straight deductible options do not come into play.
The Straight deductible is more common for larger firms or firms that have an adverse claims history. With some carriers this is the only deductible option available.
The First Dollar deductible is a richer benefit and therefore will increase the premium slightly when offered. Be sure to discuss the deductible options with your agent on what will be most beneficial for your firm from a premium and claims stand point.