Did You Know? Insurance Answers for Everyone

Hurricane Deductible Reminder

6/23/2012

 
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Eighteen coastal states permit insurers to use hurricane deductibles in their homeowners’ policies. The coastal states are Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia.

Hurricane season began on June 1st. Now is a good time to read and understand your policy.

Hurricane deductibles are usually calculated as a percentage instead of a flat amount. The percentage may vary from 1 to 5 percent of your home’s value. For example, a home that is insured for $250,000 with a 5% hurricane deductible means the homeowner is responsible for the first $12,500 in damage if the hurricane or windstorm is strong enough to meet the hurricane deductible threshold.

When and why did hurricane deductibles come to be?

In 1992, Hurricane Andrew caused $15.5 billion insured losses, making it the most expensive storm ever for insurers, with claims costing nearly four times as much as 1989’s Hurricane Hugo. It soon became apparent through an assessment of catastrophe-risk computer modeling, and residential development patterns, that home insurers were far more vulnerable to significant weather-related claims payouts than they had previously thought. Some of the largest insurers found it difficult to secure the reinsurance coverage they needed to protect their bottom line because reinsures were unwilling to assume so much risk. To get coverage from reinsurers, insurance companies agreed to greatly reduce their potential maximum claims payouts from hurricanes by requiring their policyholders to bear a greater share of the cost.

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