Hurricane Deductibles; Are you confused?

August 12, 2011

Hurricane season runs from June to September and though things have been relatively quiet so far this year. Late summer is often a time when the worst storms hit.  Hurricane Charley (2004) and Hurricane Katrina (2005) both hit the US in August so the threat is still very real.  The article below excerpted from Trusted Choice  (click on the link for the Full Article) can help understand some of the special risks of hurricanes.

It is especially important to understand how your Hurricane Deductible will apply in the event of a hurricane claim. Homeowners often think the deductible is taken as a percentage of the claim but that is not correct; it is taken as a deductible of your homeowner’s limit as outlined below.

Trusted Choice:  The Special Risks of Hurricanes…

There are significant risks presented by natural disasters, which not only threaten homes and businesses but also endanger the health and lives of people in their paths.

Nowhere is the value of insurance more apparent than with natural disasters. But consumers must make decisions on important issues in order to insure their homes and possessions from the financial risk of hurricanes and floods:

Hurricane deductibles. June through November is hurricane season in the United States. Many remember the disastrous 2005 hurricane season in the south, when insurance companies paid an estimated $41 billion for 1.7 million claims for damage to homes, businesses and vehicles in six states from Hurricane Katrina, according to the Insurance Information Institute. The Katrina disaster, combined with Hurricanes Rita, Wilma and Dennis, led to more than $57 billion of insured losses and 3.3 million insurance claims.

In recent years, insurance carriers have begun requiring homeowners to have a “hurricane deductible” where permitted by state insurance law. Designed to help insurers manage the significant financial risk they carry when paying thousands of claims in one geographic area, hurricane deductibles apply to damage solely from hurricanes.

Hurricane deductibles range from 1% to 5% of a home’s insured value. Coastal areas may be higher. The deductible is “triggered” based on the circumstances stated in the homeowner’s insurance policy language. For example, a 2% hurricane deductible for a home valued at $200,000 means that the homeowner would pay the first $4000 (2% x $200,000) of damage from a hurricane.

Like most insurance coverage, premiums are higher with a lower deductible. Policyholders may have the option of a traditional dollar deductible (such as $500 or $1000) in some states, although that’s not typically offered in higher-risk coastal areas.

As always it is important to talk to your agent to be sure you understand how your policy will cover you in the event of a loss. If you have Rhode Island or Massachusetts home insurance,  be sure to contact us at John Andrade Insurance Agency.  As a Trusted Choice Agent in BristolWarrenBarrington Rhode Island, we can answer all your Insurance questions. We are not employees of one insurance company so you can be sure we will work to find coverage that is best for you especially in hard to place coastal areas.