Someinsurance policies have a special deductible for losses caused by named storms.The insurer applies this deductibleonlywhen a named storm causes damage.This deductible is separate and different from the normal deductible in ahomeownerspolicy.
A deductible is the amount you, the policyholder,owebefore your insurance company starts paying its shareof the loss.
Insurers do thistoreduce their financialexposure. Here’s what you should know about named storm deductibles.
MAINCONSIDERATIONS
Named storm deductibles first came about in 1992after Hurricane Andrew. They becamemore commonafterHurricane Katrina in 2005, whenthe insurance industrylost$64 billion.
For the loss to be covered, itmust be caused byanamed storm.According to the Center for Insurance Policy and Research (CIPR), a hurricane deductible usuallyapplies to damage from aNational Weather Service (NWS)or National Hurricane Center (NHC) declaredhurricane.Named storm deductiblescanalso applytootherNWS or NHCweather events,suchastyphoons, tropical stormsortropical cyclones.
WHAT YOU SHOULD KNOW
In manyhurricane-pronestates, homeowners’ insurance policiesinclude deductiblesapplyingto damage caused bynamed storms.A named stormdeductibleis usuallya percentage of the home’s value, making apolicyholder responsiblefor a larger portion of alosscompared to their normalhomeownersdeductible.Percentages can range from 1%to10%of the value of the insured home.For example,if a homeowners policy hasa 5%named stormdeductible on a $300,000 housethe policyholder would be responsible for paying$15,000 out of pocket.Named storm deductibles can also be a fixed dollar amount.
Read your policy to find out whether the deductible is per event, per season or per calendar year. If multiple named stormscause damage to your home during thecoverageperiod,you may have to pay the deductible more than once.
Hurricane and named storm deductibles allow insurers to provide coverageand managethe cost ofpremiums.Premiums are the set amount you pay each month to have an insurance policy. Lower premiums can be obtained if the deductible is higher. However, higher deductibles mean consumers take on more financial responsibility overall should a loss occur.
Nineteen statesand the District of Columbia currently have some form ofhurricane or named storm deductiblein place.These nineteen states are currently Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas and Virginia.Other states may allow insurers to include hurricane deductibles in property insurance policies.Contact your state Department of Insurance with questions aboutyourcoverageor deductibles.
THREE THINGS TO REMEMBERABOUT NAMED STORM DEDUCTIBLES
Namedstorm deductibles are separateandmay be adifferent amount than your normal homeowners deductible.
Deductibles fornamedstorms can range between 1% to 10% of the value of your home.A higher deductible means a lower premium, but make sure you can afford the deductible if a claim arises.
Your deductible fornamedstorms could be per event, per season, or per calendar year. Read your policy tounderstand whichtype you have.
Source:Hurricane Deductibles, CIPR
About the National Association of Insurance Commissioners
As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.
