An Insurance Guide to Hurricane Deductibles by Daigle & Travers, Darien, Connecticut (203) 655-6974
Many homeowners living on or close to the coast often wonder if their property is covered against hurricane-related damages and they should be. High winds and tropical storms are very typical of living close to or on the Eastern Seaboard and Gulf Coast. If you own a waterfront property or live close to the coast, being covered against these severe tropical storms is critical to avoid unnecessary catastrophic financial loss.
In consideration of these events occurring, there are certain steps you can take to make sure that you have the proper insurance coverage in place weather the storm. Unless you live in an area, like Florida, where wind pool insurance is an option, all homeowners or dwelling policies generally cover wind and other damages associated with hurricanes. (Note: The peril of flood is excluded) However, you need to be aware of special deductibles. Insurance policies covering property along the coastline may contain what is called a “hurricane deductible” or “named storm deductible” or even “Tropical Cyclone deductible” and it may come into play in the event of a storm under specific circumstances.
What is a hurricane deductible?
A hurricane deductible can be found as a part of any property insurance policy. For the purposes of this blog, we will focus on the homeowner’s insurance policy. These special deductibles typically go into effect in states when the National Weather Service issues a hurricane warning or watch, or when winds reach levels of at least 74 miles per hour. The deductible for the most part remains in effect for a certain amount of time after the storm has ended. This endpoint will vary according to the terms of your policy.
From the years of 1995 to 2015, there were about $156.8 billion in incurred losses from hurricanes. Insurers enacted these special deductibles to combat the devastating losses hurricanes can cause without having to pass along massive premium increases to consumers.
Your agent will help you assess your risk and insurance needs so that you can find the most appropriate policy plan to suit your individual needs and minimize your loss potential.
How much can a hurricane deductible cost you?
Damages or losses incurred from a hurricane or named storm under your homeowner’s policy that are settled using the hurricane deductible are calculated as a percentage of the structure replacement value of your home. A percentage deductible typically ranges from 1 to 5 percent.
For example, if you own a waterfront property with a replacement value of $1,000,000 with a 5% deductible, you will be responsible for first $50,000 of property losses before your insurance policy is required to make payment on a claim. If you do the math, it can be extremely costly.
Some homeowner’s policies have mandatory hurricane deductibles. This means that insurers will not sell homeowners insurance without requiring a hurricane deductible. Other insurers have optional deductibles, which allow policyholders to voluntarily choose higher deductibles for a premium credit.
What is my eligibility for a hurricane deductible?
In addition to the District of Colombia there are 19 states where hurricane deductibles are common. If your state borders either the Atlantic Ocean or the Gulf Coast you can expect to be offered insurance policies with this provision. Hurricane damages, aside from flooding is typically covered by homeowner’s insurance, the special deductible is merely a limitation to your coverage. Depending on your state, it is possible and recommended to purchase home insurance without a hurricane deductible, unless the inclusion of it brings a reasonable amount of premium savings relative to the size of the special deductible. An independent agent representing multiple carriers is your best bet to find such an option.
These are the states most likely to include a hurricane deductible: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia, and Washington D.C.
Does my homeowners insurance policy contain hurricane deductibles?
If you live in one of the 19 states mentioned previously, the answer is mostly likely yes. However, depending on your policy its existence and severity will vary. Most states require that this special deductible is disclosed in an obvious manner on your insurance coverage declaration page. If you can’t locate it, you should consult your insurance agent. It is extremely important that you are aware that you have such a limitation.
Hurricane Insurance FAQs
What if wind levels do not reach speeds of 74 miles per hour. Am I still covered?
The peril of wind is covered by virtually all property policies where a wind insurance pool doesn’t exist. The question really comes down to the type of deductible described on your policy. You are covered, but subject to one of these 4 typical options:
• No Wind & Hail Deductible: All wind losses are subject to your basic (all peril) policy deductible. The average deductible is $1000.
• Hurricane Deductible: Wind losses caused by sustained 74mph winds or higher. The deductible can be between 1% and 10% of the policy’s dwelling Limit.
• Named Storm Deductible: Wind losses caused by sustained 39mph – 73mph winds that usually are named by the National Weather Service. Often, “Named Storm” and “Hurricane” are used interchangeably, therefore always check your policy for the definition associated with this deductible. It is usually 2% to 5% of your policy’s dwelling limit.
• Wind & Hail Deductible: All wind losses are subject to a specified wind deductible. This is the worst option you could have and should be avoided when possible.
What if my property was strengthened to prevent damages from high winds. Am I still covered?
Many states offer premium discounts to policyholders that have taken qualified mitigation measures on their properties. This typically means that you have built your home in compliance with the construction code of your given state. If this is the case, you should contact your insurance agent to check if you qualify for any premium discounts.
If my property is damaged by multiple hurricanes in a year, will I have to pay multiple deductibles?
This answer will depend on what state you live in. In Florida, the answer to this question is no. If your property is hit by more than one hurricane in a calendar year, you will only be required to pay one deductible. However, your insurer might require you to present records of losses sustained in a previous hurricane, so that they can file additional losses to another hurricane deductible. In most other states, including Connecticut, the hurricane deductible is applicable each time a hurricane or wind loss occurs.
Important Information to Remember
- Certain mitigation measures can qualify you for premium discounts.
- Percent deductibles vary by the value and location of your property.
- Some states have FAIR plans that provide coverage to people unable to find coverage in standard markets.
- Deductible triggers are affected by the intensity of the storm.
- Hurricane deductibles are percent deductibles, as opposed to standard deductibles.
- Hurricane deductibles typically range from 1 to 5 percent of your property value.
- Some states also offer wind & hail, as well as “named storm” deductibles.
- Hurricane deductibles are not part of a flood insurance policy.
- The first day of the hurricane season begins on June 1st.
Would you settle for less?
If you find your current insurance agent is unable to offer you an acceptable homeowners insurance policy, it’s time to find a new agent.
Read over your policy very carefully. Spend time comparing all aspects and not just the prices. Make sure it suits your needs and will help you find the coverage that works best for your specific situation.
Here at Daigle & Travers, we can help you find the best homeowners insurance coverage for your situation and will recommend policies from only the best homeowners insurance companies. Give us a call today (203) 655-6974.
Other Resources to Check on Homeowners Insurance and Hurricane Deductibles