Historically, for the State of Florida, a percentage of the dwelling coverage amount has been a common choice for hurricane deductible. And most often that percentage is 2%.
So for example, if you have a home that’s insured for $300,000 as a replacement value or Coverage A also known as Dwelling Coverage, the deductible that you would be responsible for in the event of hurricane damage would be 2% of that amount or $6,000.
Now, going several years without hurricanes and thus without having to pay the hurricane deductible, a percentage of dwelling hurricane deductible was not a common topic of concern or conversation. After Hurricane Irma however, it has become a more and more common topic that we discuss with clients. And so, I want to take the opportunity to lay out some of the other options that are available.
Some companies choose to not offer a deductible lower than 2% on their policy. And 2% does remain to be a very common deductible chosen by clients and on existing policies. However, many other companies are now offering alternative hurricane deductible options to include flat dollar amount options versus percentage. And some of these dollar amount options include hurricane deductibles of $5000, $2500, $1000, or even $500 for the hurricane deductible.
The other deductible that often applies to coverage at the State of Florida is known as the All Other Peril deductible, which is typically for a covered loss that is not a named hurricane. I point this deductible out because in Florida, the hurricane deductible is an annual calendar year deductible. So, if you choose a lesser than 2% hurricane deductible and we have a storm and you met your hurricane deductible of say $2500, the next hurricane if applicable would be subject to the All Other Peril deductible. You want to keep that in mind when you are selecting the All Other Peril deductible as well.
Many times, especially newer homes, we are able to change the All Other Peril and hurricane deductible to something like $2500 and the difference in premium is not all that substantial. Plus, the concern for the exposure for the insured having an out-of-pocket cost as high as 2% of their dwelling coverage amount is alleviated with selecting these lower hurricane deductibles.
We are happy to discuss options on existing policies or new policies here at Responsive Insurance and happy to answer any additional questions you have related to deductibles or otherwise.