What is a hurricane deductible?

John Egan

Many of the homeowner's insurance policies issued in the 18 East Coast and Gulf Coast states and the District of Columbia contain hurricane deductibles. But do you know whether your policy has a hurricane deductible? And do you even know what a hurricane deductible is?

The nonprofit Insurance Information Institute says hurricane deductibles have been added to many homeowner's policies as a result of increased development along the coasts and a greater risk of hurricanes. With hurricane deductibles, consumers now share more of the hurricane risk with insurance companies, the institute says.

"Hurricane deductibles were put into place to make more private insurance coverage available at competitive rates," says Jeanne Salvatore, a spokeswoman for the institute.

A standard homeowner's insurance policy deductible typically is $500 or $1,000. Hurricane deductibles are calculated as a percentage of the insured value of a house. That percentage, along with details about a policy's hurricane deductible, usually appears on the first page of your policy.

States that let insurers tack hurricane deductibles onto homeowner's policies are Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia. The District of Columbia also allows these deductibles.

Hurricane deductibles apply only to damage caused by hurricanes, and typically range from 1 percent to 5 percent of the insured value of a home, according to the Insurance Information Institute. For example, a policyholder whose home is insured for $200,000 with a 2 percent hurricane deductible would have to pay the first $4,000 needed to repair the home if a hurricane caused the damage.

In some coastal areas with high wind risk, insurers may require hurricane deductibles higher than 5 percent, the institute says. And some states let policyholders choose higher hurricane deductibles to reduce their premiums.

Whether a hurricane deductible applies to a claim depends on the specific "trigger" picked by your home insurance company or state insurance regulator, the institute says. These triggers vary by state and insurer. They usually apply when the National Weather Service upgrades a tropical storm to a hurricane, issues a hurricane watch or warning, or defines a hurricane's intensity.

"Everyone, no matter where they live, should make sure they understand what is and is not covered under their home insurance policy," Salvatore says. "Homeowners who have questions about their insurance policy should contact their insurance agent or company representative. They can explain hurricane deductibles and other parts of the policy."

By the way, standard homeowner's insurance policies cover wind damage from a hurricane but don't cover flood damage. Flood insurance must be purchased separately.

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