Understanding the Deductible for Hurricane Insurance

Understanding the Deductible for Hurricane Insurance

If you live in a hurricane-prone area, you should double-check your homeowner's insurance policy for details on the deductible for hurricane-related damage. This relatively new feature to insurance coverage is a percentage of your property's value rather than a fixed monetary amount, and it can dramatically increase the financial burden you face if your home is damaged in a hurricane.

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When Does the Hurricane Deductible Come into Play?

Only damage caused by storms classified as hurricanes by the National Weather Service or the United States National Hurricane Center is subject to a hurricane deductible. Any other wind damage is subject to a so-called windstorm deductible. The "trigger" — the incident that triggers the hurricane or windstorm deductible – is determined by each insurance company.

Katrina's Devastation

In 1992, Hurricane Andrew wreaked havoc on southern Florida, causing an estimated $25 billion in damage.

1 Then, in 2005, Hurricane Katrina struck, resulting in $41 billion in insurance claims.

2 Following these tragedies, reinsurers, which back up the cost of homes insurance for primary insurers, urged that insurers find a way to reduce their claims costs.

The firms devised a new technique for determining how much a homeowner must pay for insured storm damage before receiving insurance reimbursement. This increased the amount the homeowner must pay while reducing the financial liability of the insurer and reinsurer.

What Is a Deductible and How Does It Work?

A conventional homeowner policy insures the house and its contents, providing financial protection in the event of a disaster. The amount you must pay toward a loss before your insurance company begins to pay is known as the deductible. This is stated explicitly in the policy.

Homeowner plans for houses in hurricane-prone areas may include additional hurricane and windstorm insurance deductibles in addition to the usual deductible.

When Does the Deductible Come into Play?

Your insurance company's definition of a trigger event will determine whether or not you have to pay a hurricane or windstorm deductible. Only specified circumstances, as described in your insurance policy, will apply to the deductible.

The insurance triggers for hurricanes differ between states and insurers. That's why it's crucial to go over your homeowner's insurance policy's storm insurance information. Make sure you have copies of all pertinent paperwork in your emergency bag in case you need to leave your house quickly. 

How to Work Out Your Deductible

The deductible for hurricane insurance is computed as a percentage of the insured value of a residence, not as a fixed amount.

For example, regardless of the insured value of the home, a conventional homeowners insurance with a $500 deductible mandates the homeowner to pay the first $500 of insured damage on a claim. At a value of $300,000, a hurricane insurance deductible of 5% of the home's value requires the homeowner to pay the first $15,000 of covered losses.

The normal hurricane deductible is between 1% and 5% of the insured value of the home, while plans in more vulnerable coastal locations may have considerably larger deductibles.

Hurricane Deductibles are available in these states.

As of mid-2020, the following 19 states, plus the District of Columbia, have some type of hurricane or windstorm 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 the District of Columbia are among the states that make up the United States of America.

The Insurance Information Institute keeps track of hurricane and windstorm deductible legislation in each state.

After incurring large storm-related expenditures in the early 2000s, insurance companies began implementing hurricane and windstorm insurance deductibles. These percentage-based deductibles, in most situations, raise the amount the homeowner pays. Homeowners in hurricane-prone areas should evaluate their insurance plans to determine how much they would be responsible for if a cyclone strikes.