Understanding hurricane deductibles: Protecting your home during storm season

Understanding hurricane deductibles is essential for homeowners in hurricane-prone areas. By knowing whether your home is in a hurricane zone, when hurricanes typically occur, and how hurricane deductibles work, you can better prepare for potential losses and ensure you have the necessary coverage in place. Let’s get started.

When are hurricanes expected in your area?

Live along the East Coast?

The hurricane season on the eastern coast of the United States typically runs from June 1st to November 30th each year. This is when conditions in the Atlantic Ocean are most favorable for hurricanes and other tropical storms.

The eastern US States most at risk are in the south, including Florida, Georgia, South Carolina, North Carolina and Virginia. Northeastern states at risk to a slightly lesser degree are Delaware, Maryland, New Jersey, New York, and some coastal areas of New England. As an island in the Caribbean, Puerto Rico — a US Territory — is also significantly at risk for hurricanes.

You might remember this one: Superstorm Sandy. This was a devastating Atlantic hurricane that hit shore in October 2012. It still holds the record with winds extending over 1,150 miles. Sandy resulted in $70 billion in damages in eight countries, from the Caribbean to Canada.

Live in a state bordering the Gulf of Mexico?

In many cases, hurricanes that begin in the Atlantic and threaten the east coast of the US sometimes veer west towards the Gulf of Mexico and may impact Mississippi, Alabama, Texas, and Louisiana. 

Because the Gulf is generally warmer than the Atlantic, these hurricanes can increase in intensity. The peak of hurricane activity here typically falls between August and October.

You may recall Hurricane Katrina, which caused over $145 billion in damage to New Orleans and the surrounding area in late August 2005. 

Live on the West Coast?

Western States — with the colder temperatures of the Pacific waters — usually don’t experience a traditional “hurricane season” like the East Coast. While milder, the season typically runs longer, from May 15th to November 30th. 

The remnants of these weather events can affect California, Oregon, and Washington, which may see heavy rainfall, strong winds, and the potential for flooding and landslides. However, these storms are generally less frequent and intense than Atlantic hurricanes.

Are you protected from hurricane damage?

As hurricane season approaches, it’s crucial to determine if your home is susceptible and, if so, to ensure it’s adequately protected against potential damages caused by these powerful natural disasters. That’s where hurricane insurance comes in.

Now, the term hurricane insurance might raise some eyebrows. Technically, there’s no such thing as hurricane insurance, although hurricane damage is addressed with two types of coverage: flood insurance and homeowners insurance. Depending on where you live and what your homeowner policy covers, you may need separate windstorm insurance, too.

Regardless of what it’s called, you might hear the term “hurricane deductible.” While most homeowners are familiar with insurance deductibles, many may not fully understand how deductibles for hurricane insurance differ. 

What are hurricane deductibles?

In simple terms, a deductible is the portion of an insurance claim that homeowners must pay out of pocket before their insurance coverage kicks in. But unlike standard deductibles, which apply to perils like fire or theft, hurricane deductibles are triggered only if the claim is deemed to have been caused by one of those three common wind perils — a hurricane, a “named” tropical storm, or a tornado. 

While hurricane deductibles are often part of a windstorm policy, some providers may also offer hurricane coverage in policies for homeowners, condo and landlord insurance. And they work the same way as a regular home insurance deductible. The only caveats are its cost and what it covers. 

Let’s look at the basic structure of hurricane deductibles and how they work.

How do hurricane deductibles work?

To grasp the concept, let’s consider the following example. 

In a hurricane-prone area, you may have a homeowner’s insurance policy with a separate hurricane deductible. These deductibles are often a percentage of your home’s insured value, although, in some states, insurers are required by law to offer an average flat fee hurricane deductible.

Let’s work with the percentage model for this example since that’s the most common. Suppose you’ve insured your free-standing home for its total value of $400,000. This is called “dwelling coverage” because it covers the cost to repair or rebuild your home if it’s damaged or destroyed by a covered event, such as a fire, hailstorm, or windstorm. Attached structures — like your garage, a deck, or a porch are typically included. 

Your homeowner’s insurance policy has a standard deductible of $1,000 but may also have a separate hurricane deductible. You can typically choose the percentage for your hurricane deductible — generally between 1% and 5%, although they can go as high as 10% for high-risk areas. This is important because a higher deductible percentage will lead to lower insurance premiums, while a lower percentage will result in higher premiums.

Let’s say you decide on a 5% hurricane deductible. Now remember, this represents 5% of your home’s insured value. So, if your home is insured for $400,000, your hurricane deductible would be $20,000 (5% of $400,000).

Let’s assume your home sustains $60,000 in damages due to a hurricane. As the insured homeowner, you’d need to pay $20,000 toward the hurricane-related damages before your insurance company would cover the remaining $40,000.

Are hurricane deductibles different for condos?

As we just mentioned, dwelling coverage for free-standing houses matches the total amount should you need to rebuild your home from the ground up in the event of a total loss. 

It works a bit differently for condominiums — since condo owners don’t actually own the building they live in. For condos, the coverage may vary based on the type of insurance the condo homeowner’s association has. 

  • Walls-In coverage covers the building exterior and the interior of your condo unit to some extent. Typically, it includes the basics, like drywall, flooring, cabinetry, plumbing fixtures, and electrical. 
  • Bare Walls coverage covers the structural elements of your condo unit up to and including the drywall. Anything beyond that is not covered.

Because of this, many condo owners take out individual dwelling coverage equal to a percentage of their condo’s total value — not the full amount. This is often around 20% -25%. So, for example, with a $400,000 condo value and a 5% hurricane deductible, it would look like this:

  • $400,000 condo value x 20% dwelling coverage equals = $80,000 
  • $80,000 dwelling coverage x 5% hurricane deductible = $4000  

So, in this scenario, you’d pay a $4000 hurricane deductible toward a verified claim before your insurer covers the remainder.

Don’t be blown away by hurricane damages

Hurricane deductibles apply specifically to wind damage caused by hurricanes, tropical storms, or tornadoes. If you live with wind-related perils and have insurance to protect against them, you’ll need to pay your hurricane deductible before your insurance company steps in to cover the remaining damage.

Remember — higher risk, higher deductible. Hurricane deductibles are generally higher than standard deductibles due to the increased risk and potential for significant losses associated with hurricanes. Each insurance policy may have different deductible structures, so getting guidance from a knowledgeable source is important. That’s why we’d love to help.

If you’re ready to learn more about wind perils, hurricane deductibles and other homeowner insurance-related topics, contact the Guided Solutions team. Or request a quote today.


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