With the recent hyperactivity of hurricanes world-wide and the 2 recent hurricanes that seriously threatened Hawaii, I placed a call to my homeowners insurance company to get clarification on my hurricane insurance.  My original question was about whether I additionally needed any flood insurance to cover any hurricane damage.  The answer was no, unless the home was in a flood zone, but it instead revealed a 5% hurricane home insurance deductible.  I incorrectly assumed, probably like most people, that the 5% deductible was dependent on the amount of damage that a home sustains.  Wrong!  Regardless of the damage sustained, the hurricane deductible is dependent on the assessed value of the building.  Hurricane insurance kicks in AFTER the 5%, which for most homeowners in Hawaii is anywhere from $10,000-$20,000, or more.  Bottom line, hurricane insurance doesn’t pay until you pay the first 5%.

 

WHAT is a Hurricane Deductible?!

Read the small print in the hurricane insurance policy.  If a home sustains damage that is less than 5% of the home’s assessed value, then the homeowner is completely responsible up to that amount.  Hurricane deductibles are completely separate from regular homeowners insurance deductibles, which is a fixed dollar amount (usually $200-$5,000).  A 5% deductible means homeowners pay $5,000 for every $100,000 in home value from their own pockets before hurricane insurance starts paying.  The average cost to build a home in Hawaii is $500,000 or more accurately about $250.00 for every square foot.  Thus, in addition to the $10,000-$20,000+ deductible there will be a gap between the value of the home and the cost to replace it if completely destroyed by a hurricane.

 

So first check the value of your home and then the hurricane deductible percentage on your hurricane policy.  Better yet, call an insurance agent.  My insurance broker stated that most deductibles are 5%.  3% deductibles would mean a steeper monthly insurance cost, and as of April, 2018 State Farm stopped offering/selling 3% deductible hurricane insurance.  Call the insurance company with questions or for clarification.

 

History of the hurricane Deductible

Hurricane deductibles started in 1992, after Hurricane Andrew’s massive damage to South Florida inflicted major losses on homeowners insurance companies. Insurance companies turn to reinsurers when they’re having trouble paying large amounts of claims all at once, but even reinsurance companies were struggling with the huge costs.  Insurance companies then began requiring hurricane deductibles in 19 states and Washington, D.C., that are susceptible to hurricane damage.

Hurricane deductible payments usually must be made when there is damage from a named hurricane.  Sometimes a tropical storm will trigger a hurricane deductible. The hurricane deductible will be in effect for any damage that occurs until the storm is downgraded and rules vary by state.

 

Lowering Hurricane Premiums

Some states mandate lower insurance premiums for homeowners who take preventative damage measures against hurricanes. An example of such an improvement is installing storm shutters or installing hurricane-resistant laminated glass windows and doors.

 

Flood Insurance

Homeowners should also know that even if they pay a hurricane deductible, their homeowners insurance won’t cover flooding.  A separate flood insurance policy is needed to cover flood damage, which is required if the home is located in a flood zone (check the online Hawaii flood zone maps here).

 

Windstorm Deductibles

Sometimes when the hurricane deductible doesn’t apply, a windstorm deductible might apply. Again, read the fine print of your homeowners insurance policy to understand what deductibles you are responsible for and under what circumstances.

Are you prepared to cover repair bills that your insurance won’t?

 

States Where Hurricane Deductibles Apply

• Alabama
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Louisiana
• Maine
• Maryland
• Massachusetts
• Mississippi
• New Jersey
• New York
• North Carolina
• Pennsylvania
• Rhode Island
• South Carolina
• Texas
• Virginia
• Washington DC

 

Sources:

State Farm Insurance Agent via phone conversation 3 times the day of Tropical Storm Olivia
Hurricane Deductible | Investopedia https://www.investopedia.com/terms/h/hurricane-deductible.asp#ixzz5RLicka66

 

Thanks for reading.  Hopefully this article was helpful for any homeownwers like me, who didn’t know about this huge amount that we’ll need to pay for any hurricane damage, before hurricane insurance.  Let me know if you have any questions or concerns.

 

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