Check your insurance coverage as hurricane season arrivesby Craig Guillot
As we near the most active part of the Atlantic hurricane season, homeowners in coastal areas should take a closer look at their insurance coverage. Unlike traditional homeowners insurance, the windstorm or hurricane part of a policy carries a higher deductible that can be as much as 5 percent of the home’s value. Having the right insurance in place, and the funds to cover the deductible, can make a world of difference in recovering from a storm.
Hurricanes trigger higher deductibles
While traditional homeowners insurance policies often have a set deductible ranging from $500 to $5,000, hurricane deductibles are usually based on a percentage of the home’s value, says Michael Barry, vice president of Media Relations for the Insurance Information Institute. This often ranges from 1 to 5 percent. “It can really be a significant sum of money,” says Barry. “If your house is insured for $200,000, you would be on the hook for $10,000 before your insurance kicks in.”
For insurance purposes in most states, a hurricane deductible applies when a “named storm” strikes the area. A named storm is typically defined as a tropical storm that is named by the National Weather Service. Tropical storms have maximum sustained surface winds ranging from 39 to 73 miles per hour.
Barry, says unless they’ve suffered damage before, many homeowners don’t realize that they have separate hurricane deductibles.
Storm definitions vary by state and insurer
The fine line of what is covered by regular homeowners insurance and what is covered by hurricane insurance varies from state to state. Most insurers use their own “triggers” which determine when a hurricane deductible applies. Often, that is based on the severity of the storm, where it strikes and the time in which the damage occurs.
In some states (such as New York), some companies don’t trigger a hurricane deductible until a storm reaches a Category 2. In others, such as Florida, it begins when the National Weather Service issues a hurricane watch or warning anywhere in the state. The trigger will typically end 72 hours after the warning ends or the storm has passed.
“It really depends on the policy,” says Barry. “Consumers need to look closely at their declaration page to find the deductible and they’ll have to read deeper into the policy to find the trigger.”
If it’s not listed in the details, Barry says you can also call your insurance company or agent and ask.
Separate deductibles for hurricanes were introduced in many states in 1992 following the $15.5 billion of insured losses from Hurricane Andrew. Since hurricanes have the potential to cause so much damage at once, insurers argued they wouldn’t be able to remain in business and obtain reinsurance if consumers didn’t bear a greater share of the costs.
Flooding not covered
Many homeowners are also not aware that floods, even those due to a hurricane storm surge, are not covered by homeowners insurance, says Mari Adam of Adam Financial Associates in Boca Raton, Fla. A recent survey by the Insurance Information Institute found that only 17 percent of American homeowners have flood insurance.
Adam says that flood insurance is relatively inexpensive and is only written through the FEMA-backed National Flood Insurance Program. According to FEMA, the average flood insurance policy costs around $600 per year.
“Like life insurance, flood insurance is relatively inexpensive,” says Adam. “You really need it if you’re in a flood-prone or hurricane area because flooding can do a lot of damage.”
Most flood policies take 30 days to go into effect, so it’s essential to act quickly before the peak hurricane month of August arrives.