Sticker shock is the last thing you want after damage from a hurricane. To ensure you're financially prepared when the next big storm strikes, it's important to know if you have a hurricane deductible on your homeowners insurance policy, especially if you live in a hurricane-prone area such as coastal Virginia. As an insurance consumers, you may not fully understand your named storm deductible or how it is calculated, leading to surprises and financial hardship when a claim occurs.
Virginia Beach -Hurricane Isabel 2003- Photo: vims.edu
What is a Hurricane Deductible?
Since 2005, the increasing cost of Atlantic Basin hurricanes has prompted insurance companies in 19 states, including Virginia, to include hurricane deductibles, sometimes also known as "named storm deductibles." The extraordinary losses of Hurricane Andrew in 1992, followed by $41 billion in damages from Hurricane Katrina, added to the trend of more people moving to coastlines with increasing property values that has amplified the financial impact of claims for insurers.
The indications suggested homeowners living in high-risk areas would need to assume some of that risk with these big storms to keep home insurance affordable for everyone. The financial impacts, as well as the danger of these storms, have continued to climb. Hurricane deductibles allow insurance carriers to provide coverage and manage the cost of premiums for their policyholders.
When do Hurricane Deductibles Apply?
Named storm deductibles and hurricane deductibles are applied when the National Weather Service (NWS) "names" a tropical storm or hurricane, and issues a hurricane watch or warning for any part of Virginia. It's essential to check your specific insurance policy to understand the exact conditions under which each deductible applies, as their scope can differ. This does not apply to winter named storms. If you experience damage from a covered peril and file a home insurance claim, instead of paying the standard deductible, your out-of-pocket would be the flat named storm deductible or a percentage deductible of coverage A on your policy.
Flat Named Storm Deductible vs Percentage Named Storm Deductible
A "flat named storm deductible" refers to a specific dollar amount that a homeowner pays out of pocket before their insurance coverage kicks in for damages caused by a named storm, like a hurricane or tropical storm. If you don't have a "named storm deductible" listed on your policy, you have the standard deductible, or what we sometimes call a non-named storm deductible, for a home claim during a hurricane or other named storm.
If your property's location requires a percentage deductible, you will have a 1%, 2%, or 5% deductible of your Home's value (coverage A). A lower percentage of deductible results in a higher annual premium. In comparison, a higher deductible lowers your yearly premium but will cost you more out-of-pocket in the event of a claim from a named storm.
For example, your Home's value is $300,000 (coverage A- Dwelling). In this case, your deductible on a weather-related claim for the named storm would be $3K for a 1% deductible with a higher premium. If you have a 2% deductible, you would pay $6K with a lower premium.
Do Hurricane Deductibles Apply to Renters Insurance and Car Insurance?
It's good to know that there are no named storm deductibles for a renters insurance or car insurance policy. If you have a renters policy, your personal belongings are protected from hurricane or storm damage, except for flooding, and your landlord's insurance is responsible for the structure. If you have comprehensive auto insurance coverage, your car is protected from flooding and other damage during a hurricane.
How do you Know if you Have a Hurricane Deductible?
If you are a Northern Neck Insurance member and you have a named storm deductible, it is listed on the declaration page of your homeowners policy and replaces the standard deductible on your policy when you file a claim for damage by a named storm or hurricane.
Local Independent Insurance Agents Are Essential
Understanding all of your home insurance deductibles is another reason it's critical to build a relationship with your local independent agent. Coverages are often complex, and the details matter. The right agent will walk you through everything to be sure you understand your policy and coverage.
They'll also help you ensure you are adequately covered for the risks to your home from a hurricane (opens in a new window) in your area. Use this time to make changes to your policy, like reviewing your deductibles. Changes to a named storm deductible on your home insurance policy can only be made before a hurricane is imminent.
It's also important to remember that hurricanes can cause significant flooding. This type of flooding is not covered by standard homeowners insurance (opens in a new window) or a renters insurance policy. All of these considerations, along with financial planning ahead of time for a hurricane or named storm, should factor into your family's hurricane plan (opens in a new window). Visit FEMA's site for more information and assistance with financial preparation for a disaster or other emergency.
Sources:
https://www.ready.gov/financial-preparedness
https://www.vaemergency.gov/prepare
THE NORTHERN NECK INSURANCE INTEGRITY PROMISE — We pledge to provide straight talk and good counsel from our NNINS Virginia insurance experts through our blog. While we hope you find this to be a helpful source of information, it does not replace the guidance of a licensed insurance professional, nor does it modify the terms of your Northern Neck Insurance policy in any way. All insurance products are governed by the terms in the applicable insurance policy.
