Hurricane Deductibles: What You Should Know in the Wake of this Year’s Devastating Storms

It’s been a busy hurricane season so far — and it doesn’t look like it’s letting up just yet. Irma, the latest hurricane to hit the U.S. and several Caribbean islands, took her toll on the state of Florida — leaving millions without power and destroying many homes and businesses. Now it’s time to clean up and return to normal.

But doing so won’t be cheap, in part because of special “hurricane deductibles” that apply to policies here in Florida. Similar conditions may also apply to your state. In Texas, for example, some policies in coastal areas may carry a different deductible for damage sustained during a hurricane, so it may be worth doing a little research.

Let’s focus on Florida for now though. Florida’s homeowner’s policies have two types of deductibles: Hurricane and “All Other Peril”. The hurricane deductible is mandated by Florida Statute and is more expensive than “All Other Peril” because hurricane-generated wind damage can be much worse than damage from other causes.

As per Florida Statute, insurers must offer the following hurricane deductibles: $500, 2%, 5% and 10% of the insured value, which is usually the same as the total home value. The “All Other Peril” deductible is generally much lower: $500, $1,000, or 1% of the home value.

So how do you differentiate between hurricane and non-hurricane wind damage? It may sound simple, but there are strict guidelines on hurricane deductibles.

Hurricane deductibles cannot be applied to any wind damage that occurs more than 72 hours after the final hurricane watch or warning has been lifted in Florida by the National Hurricane Center. In Irma’s case, any wind damage sustained after 8 a.m. on Thursday, September 14 (72 hours after the final watch was lifted) is not subject to a hurricane deductible. That means the “All Other Perils” deductible would kick in at that time.

In addition to the time frame, the damage must be done by a hurricane not a tropical storm. So, if your residence sustained damage from a named tropical storm, your “All Other Peril” deductible would apply.

It’s important to read your homeowner’s policy very carefully regardless of where you live. Sometimes insurers require you to report damage even if doesn’t amount to more than your deductible.

If your home is hit by two hurricanes in one year, you will most likely end up paying your hurricane deductible (if the damage exceeds the deductible amount) for the first claim and then your “All Other Peril” deductible to cover any losses after the second hurricane.

Remember that it’s also common for insurers to exclude flood damage coverage. You’ll need a separate policy for that. FEMA has a flood policy program that ensures that coverage is available and affordable, at the moment.

The bottom line is that you need to make yourself familiar with your policy and the company that covers your property. Make sure you know what needs to be done and when. We still have until November 30 before the Atlantic hurricane season ends, so remain vigilant and prepared!

As always, we stand ready to assist by providing tools that allow you to check the safety of your insurer on the Weiss Ratings website.

Think Safety,

Gavin Magor

Insurance Insights Edition, By Gavin Magor, Senior Financial Analyst Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media.