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Be Aware of Hurricane Deductibles


In one of our previous blogs, we covered the topic of how most homeowner’s insurance policies do not cover damage from floods. This is because insurers deem floods a catastrophic event that would put the financial health of their firms in jeopardy, so they exclude losses caused by floods from their coverage.

Due to the recent events in both Texas and Florida, many homeowners may feel they will be excluded from receiving any benefits from their insurance policies due to the immense flooding that hurricanes bring with them. While this is true for any damage caused directly by the historically high flood waters in Houston, other damage may be covered due to another rarely known provision of homeowner’s policies called the “Hurricane Deductible”. This deductible originated after Hurricane Andrew hit the Florida coast in 1992 and became a standard addition to most homeowner’s policies after Hurricane Katrina hit the gulf coast in 2005, and they allow insurers to offer coverage for natural disasters to areas that are more likely to experience them.

However, they do this by shifting more of the cost to the consumers via this alternate, higher deductible. A standard hurricane deductible will cost the consumer anywhere from 2% to 5% of their home’s insured value before they receive any reimbursement due to natural disaster related damages. That means if your home is insured for $500,000 and you have a 5% Hurricane Deductible, you would be on the hook for $25,000 in damages.

This deductible is obviously extremely expensive and would strain many families’ savings accounts, but hurricanes can produce catastrophic damage across large swaths of land and if your house is partially or totally destroyed during one, having the option to pay the hurricane deductible in order to be reimbursed for huge damages is a beneficial option to have. In addition, during times where no hurricanes occur, the policy premiums are lower than they would have been if the policies fully covered hurricane damage.

One more aspect of hurricane deductibles to consider is that in rare occasions, government agencies can negotiate with insurance companies to get these alternate deductibles waived. While the insurance companies are allowed to enforce the terms of their policies as written, the hurricane deductibles were waived in many instances after Hurricanes Sandy and Irene. Homeowners affected by hurricane damage should not expect these deductibles to be waived, however, they should be diligent about following any updates put out by their state and local governments. We are in the thick of hurricane season and along with that comes uncertainty in many insurance markets.