Living in hurricane-prone areas often means getting insurance to cover the cost of hurricane damage. A recent homeowners insurance change uses deductibles to transfer financial responsibility to homeowners. Still, the deductibles are often higher than expected. So what else do you need to know about hurricane deductibles?
Hurricane deductibles are usually higher than homeowners’ insurance, and companies will only pay for damages caused by major hurricanes once a season or year. Homeowners insurance is a requirement in most states, while hurricane deductibles are not.
Read on to understand the differences between a standard policy and one with hurricane deductibles. This will help you know what to look for in a home insurance policy!
1. Hurricane Deductibles Are a Percentage, Not a Fixed Amount
A deductible is an amount you are liable to pay out-of-pocket before the insurance company covers the cost of damage.
Homeowners’ insurance is typically a fixed amount, but hurricane deductibles are a percentage based on your dwelling coverage.
Insurance companies use the term dwelling coverage to refer to the value they attach to the structure of a home, excluding the land underneath it and the contents within.
Dwelling coverage includes coverage for the foundation, frame, roof, walls, and other architectural components of the building.
Hurricane deductibles can be as low as one percent of your dwelling coverage or as high as 10 percent.
This percentage matters because your monetary obligation can rise significantly depending on the value of your house.
For example, suppose you have a home valued by the insurance company at $500,000. In that case, the deductible can be between $5,000 and $50,000.
If a hurricane damages your house, you’ll have to pay that amount ($5000 to $50,000) in repairs before the insurance company starts paying.
Note that you don’t have to pay the deductible when the hurricane occurs. Instead, your insurer will make the deduction from your final payout.
2. Hurricane Deductibles Mean Variable Insurance Premiums
When presented with the range of hurricane deductibles, don’t be fooled into thinking that a lower percentage is inherently better.
In the example mentioned earlier, having a one-percent deductible means you can start receiving payment from your insurance company once damages exceed $5,000.
However, that usually means paying a higher monthly insurance premium.
Generally, you get higher hurricane deductibles in your homeowner’s insurance policy because you opted for a lower monthly premium.
However, many homeowners nowadays choose lower premiums and invest that money in hurricane-proofing instead.
If you’re still determining which way to go, consider how much you can afford to pay monthly and how much money you can keep in your emergency fund when you’re required to pay for repairs because a hurricane deductible was triggered.
A deductible set at two to five percent of dwelling coverage is usually acceptable for most homeowners.
This way, the monthly premium is affordable, and the homeowner can afford to pay the deductible if charged.
3. Hurricane Deductibles Apply After a Category-One Hurricane
Any hurricane, big or small, has the potential to cause significant damage to your home. If you’re worried about paying for the damages caused by a smaller hurricane, you shouldn’t be.
In most cases, hurricane deductibles only apply after a Category 1 hurricane or higher.
The National Oceanic and Atmospheric Administration defines a Category 1 hurricane with wind speeds of 74 to 95 mph (119 to 153 km/h).
For reference, Hurricane Dolly (2008) and Hurricane Sandy (2012) were Category 1 hurricanes.
The laws defining the hurricane category that triggers hurricane deductibles vary across the United States. Check your local laws for specifics.
When there’s a hurricane, check how it was categorized. If it’s lower than Category 1 (i.e., a tropical storm), you’ll incur minimal charges, if there are any.
While your insurance company will calculate these details independently, being knowledgeable will help you decide the best insurance policy for your needs. Also, this should help you file insurance claims whenever applicable.
4. Hurricane Deductibles May Apply Once a Season
Conventionally, insurance companies restrict the frequency at which hurricane deductibles are enacted.
This means the insurance policy allows the use of hurricane deductibles either:
- Once a season: The insurance company can only demand deductibles once a year during the hurricane season; or
- Once a hurricane: If there are multiple hurricanes during a season, the insurer can demand hurricane deductibles each time a hurricane occurs, making it harder for homeowners to receive payouts from the insurance company.
There are often laws that regulate how often hurricane deductibles can be charged, so check your state laws for more details.
5. Some States Don’t Allow Hurricane Deductibles
Hurricane deductibles are only allowed in 19 states and Washington, D.C. In some states, they’re called “named storm” deductibles, with the two versions being similar.
The difference between named storm and hurricane deductibles is that the latter only applies to damage caused directly by hurricanes.
On the other hand, named storm deductibles cover damage from other weather events like cyclones and typhoons.
Florida has the most regulations in place regarding hurricane deductibles. The state passed laws limiting how much insurance companies can ask policyholders in the form of hurricane deductibles.
Every state insurance company can set the minimum and maximum amounts to charge as hurricane deductibles.
6. Hurricane Deductibles Do Not Cover Flooding
Standard home insurance policies typically don’t cover flood damage, regardless of whether they include hurricane deductibles.
Across the United States, policyholders can only claim insurance payouts for flood damage if they have a separate flood insurance policy.
The damage from flooding is significantly different from hurricanes. For example, you could install hurricane windows to mitigate a hurricane’s damage, but your house might still be flooded.
In that case, hurricane deductibles won’t apply because a separate policy would cover the damage.
7. Hurricane Deductibles May Not Cover Windstorm Damage
Another feature common in insurance policies is that they do not cover windstorm damage under the same policy that covers hurricanes. Instead, a separate windstorm is usually deductible for damages caused by wind and hail.
Insurance policies craft their policies so that the deductible you owe changes depending on the type of weather event.
For example, you may owe a windstorm deductible if the weather event is not declared a category one hurricane. Check your insurance policy for specifics.
8. Hurricane Trigger Periods May Have Time Limits
Some states have a time limit on when hurricane deductibles are triggered.
For example, policyholders in Delaware are liable to pay hurricane deductibles for damages occurring from the moment the National Hurricane Center declares a hurricane up to 72 hours after the last hurricane warning.
The law above applies to hurricane warnings across the state of Delaware. So even if your area is already clear, you may be liable to pay the deductible if some part of the state is still under a hurricane warning.
In other states, the time limits may be shorter.
For example, Maine’s laws shorten the duration to only 24 hours after the last hurricane warning. Of course, this is understandable because Maine is not particularly prone to frequent hurricanes.
9. Some States Offer Hurricane Deductible Discounts
In some states, homeowners can get discounts if they retrofit their homes using hurricane-proofing methods or build them using hurricane-resistant construction.
The policyholder may get a discount on their hurricane deductible or monthly premiums.
In other words, homeowners who take a proactive approach to protect their homes from hurricane damage may be eligible to pay less when hurricane deductibles are triggered by their insurer.
The more measures you’ve taken to hurricane-proof your home, the higher the discount you qualify for.
To determine which measures to use, refer to the building code in your state.
For example, in Florida, as long as your home meets the mitigation criteria of the 2001 Florida Building Code, you qualify for discounts.
Some of the mitigations you can take to qualify for a discount include the following:
- Using reinforced concrete for your roof deck
- Implementing roof-to-wall connections with mechanisms such as double straps
- Shaping the roof of your house like a pyramid, the most resilient roof shape
10. Hurricane Deductible Triggers Vary Between Insurers
There are many similarities in how insurance companies apply specific “triggers” to enact hurricane deductibles and how claims are processed.
A trigger event is the specific set of parameters that an insurer defines as the minimum requirement to enact hurricane deductibles.
One of the common parameters for trigger events is that the National Weather Service must declare a hurricane. However, some insurers might add other parameters to define trigger events.
Insurance company protocols to specify trigger events are regulated by laws that differ significantly between states.
Still, it’s a good idea to read your specific insurance policy to understand its parameters. You’ll find everything on the “declarations” page.
If you need help understanding the policy, consider hiring a lawyer to help simplify the legal language.
My Own Story With Hurricane Deductibles after Hurricane Ian
Like everyone here in Florida glued to the news as Hurricane Ian was barreling towards us in southwest Florida, we were of course thinking about how much damage our houses were going to be hit with.
The year prior, we had completed our first netzero home renovation, which included a new roof, solar, and pretty much everything else in a fix-n-flip type of project.
Since insurance in Florida is very expensive anyway, I was trying to save money on the premiums. So when renewing my policy, I opted for the 2% deductible version of the hurricane insurance. This meant that my deductible was $13,500 (gulp).
After withstanding 140MPH winds for 5 or 6 hours, everyone was able to go outside to assess the damage. I had a great renter in there at a time, and luckily, not only did the house withstand the storm extremely well, he said it “was a fortress“.
The insurance adjuster took about two weeks to come out on site, and did a good job of walking around and in the property to mark down any damage at all.
Well, two weeks later Progressive came back with their email about what they were willing to pay for. You can see some of the damage above, but there was a lot more. Here’s what they said:
Based on our review, the repair or replacement cost of the covered portions of the loss came to $2,677.91 which is below the Hurricane deductible of $13,500.00. For this reason, we will be unable to issue payment for your covered damages.
Yes, that’s right. For everything you see above, they’re only offering $2,677.91. For the fence alone, quotes come in at $8-10,000 (because of the high demand and fence companies know they have the market cornered).
So to finish the story – I called literally about 50+ contractors, fence companies, handymen, friends and family, and did whatever it took to repair it with me managing it all myself. A lot of people are in the same boat. In the end, I spent maybe $3,500 with a lot of DIY to fix up the property again.
I guess the point is that you can’t really rely a whole lot on hurricane insurance, especially if your deductible is high. Every home and situation is different, but this is my story.
Nationwide: What Is Dwelling Coverage | National Oceanic and Atmospheric Administration: Saffir-Simpson Hurricane Wind Scale | Forbes Advisor: Watch Out For Special Hurricane Deductibles In Home Insurance | FEMA: Flood Insurance | NAIC: Hurricane Deductibles| Insurance Information Institute: Background On: Hurricane And Windstorm Deductibles