What Are Hurricane Deductibles & How Are They Calculated?
What Are Hurricane Deductibles & How Are They Calculated?
An insurance deductible is the amount the policyholder agrees to pay before the insurance company pays for a loss. In short, it’s the amount of responsibility a policyholder agrees to take on for what they’re insuring. While deductibles are available for most insurance policies, they aren’t always calculated or applied in the same way. Hurricane deductibles, for example, are often unique and can cause confusion for homeowners.
What are hurricane deductibles and how are they applied?
Hurricane deductibles are the portion of damage that you as the homeowner will be responsible for before the insurance company starts paying for damages. Hurricane deductibles are similar to other deductibles except that they are a specific deductible that applies when a specific even/peril occurs. There are some exceptions for “excess and surplus” policies in Florida but in general, the hurricane deductible only applies when the damage occurs from a named hurricane. So, other wind damage is not subject to the hurricane deductible. Also, it is very common in Florida that the hurricane deductible is a calendar year deductible. This means if we have two hurricanes in the same calendar year and you have already satisfied your deductible with the first storm, only the “all other peril” (often much lower) applies to damage from the second hurricane in the same calendar year.
Many times in Florida, hurricane deductibles are expressed as a % of the dwelling coverage limit. So, if your home is insured for $200,000 and you have a 2% hurricane deductible, the hurricane deducible is $4000. There are some specific dollar amount hurricane deductibles available as well. Some of these are $500, $1000, $2500, $5000, for example. Not all companies offer all hurricane deductible options. It is generally an advisable and good idea to determine the impact on premium for any hurricane deductible changes. Lowering the deductible will increase the premium and raising the deductible will decrease the premium but it is important to understand the true impact for any potential adjustment to the hurricane deductible so you can verify if the economics makes sense for you.
For example, you may decide that although a 5% hurricane deductible would save you $150 per year on your premium, it doesn’t make sense in terms of the substantial additional out of pocket costs for you versus 2%. A good agent can help you analyze various deductibles options and their associated premiums.
As soon as a storm is named a hurricane by the National Weather Service, the named hurricane deductible becomes applicable. The hurricane deductible will continue to apply for a specified time period after the hurricane warning/watch/event has ended. Your policy will typically spell out in very clear language the specifics of when the hurricane deductible applies.
How are hurricane deductibles calculated?
As referenced above, a hurricane deductible can be expressed as a fixed dollar amount or, more commonly, as a percentage of the home’s insured value, typically shown as coverage “A” on home insurance policies. In the case of condominiums, there are some cases where the hurricane deductible is a % of the persona property coverage limit (Coverage “C”). The deductible can vary from 1% of the home’s value to over 10%. The premium for the insurance will be determined by the amount the homeowner chooses to self-insure. So, a deductible based on 1% of the home’s value will cost more than a deductible based on 10% of the home’s value. It is important to remember, the % is of the homes insured value/dwelling coverage and not a % of the damage caused by the hurricane.
Hurricanes can wreak havoc on a home or non-residential property. Damages can easily be $100,000 or more, and some homes may even have to be entirely rebuilt. The best way to get more information on home insurance and hurricane deductibles is to ask a licensed agent in our office. We can assist you with assessing your insurance needs and provide you with some options from multiple A-rated insurance companies.
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Our licensed staff is ready to help you get multiple home insurance options and explain the different hurricane deductibles available. Because we’re an independent insurance agency, we can evaluate options from multiple insurance companies to help you find the right coverage at the right price.
The above description provides a brief overview of the terms and phrases used within the insurance industry. These definitions are not applicable in all states or for all insurance and financial products. This is not an insurance contract. Other terms, conditions and exclusions apply. Please read your official policy for full details about coverages. These definitions do not alter or modify the terms of any insurance contract. If there is any conflict between these definitions and the provisions of the applicable insurance policy, the terms of the policy control.
