Hurricane Insurance Deductible: Who pays what?

Hurricane season is just around the corner. Do you know what your insurance will and won’t pay if you have storm damage?

The concept of an insurance deductible is simple: It’s the portion of an insurance claim that the policyholder is responsible for paying—what the insurance company deducts from the claim. Your basic homeowners deductible is known as “All Other Perils” (AOP). It’s usually a fixed, flat amount that applies to all circumstances except when the hurricane deductible is triggered.

In Florida, hurricane deductibles apply when there is wind damage to a home as a result of a storm system, which has been declared to be a hurricane by the National Hurricane Center and comes with a hurricane watch or warning. Hurricane deductibles are usually based on the total insured value of the property; however, specifics (including the amount of the deductible and when it applies) vary by state and are determined by a combination of state law and company policy.

For example, in Florida, hurricane deductible options range from $500 to up to 10% of the insured value of the dwelling. Hurricane deductibles apply on an annual basis to hurricane losses that occur in a calendar year. That means if you have the misfortune to experience damage from more than one hurricane in a single year, you are only responsible for one deductible. It’s also why you’re encouraged to report all windstorm-related damage to your Florida homeowners insurance carrier as it occurs.

If you have the option to choose a higher deductible, keep in mind that doing so lowers your annual premiums but increases the amount you have to pay before the insurance kicks in. Before you choose a higher deductible, be sure you have the resources to cover what the insurance won’t.

Example: On a home insured for $500,000
2% hurricane deductible = you’ll pay the first $10,000 of your claim
5% hurricane deductible = you’ll pay the first $25,000 of your claim

Example: On a home insured for $2,500,000
2% hurricane deductible = you’ll pay the first $50,000 of your claim
5% hurricane deductible = you’ll pay the first $125,000 of your claim

Calculate the premium savings and the relative risk, then make a decision based on your specific circumstances.

When the hurricane deductible is triggered, it typically applies to your home and personal property. Some policies exclude coverage for hurricane damage to screened enclosures unless that coverage is purchased for an additional premium. Again, check your policy, evaluate your risk, and make a decision based on what’s best for you.

The time to review your homeowners policy for hurricane deductibles is before hurricane season starts. Where do you find your deductible amount? Check the declarations page of your policy; it should be clearly stated. If you have questions, contact us for assistance.

Please remember that the comments contained in this blog are general in nature and that coverage under any specific policy of insurance will depend upon the terms and conditions of such policy.