Does Your Homeowners Insurance Policy Have a Wind Deductible?

Property insurers doing business on the U.S. East Coast have had a tough decade.  2005’s Hurricane Katrina is estimated to have cost them somewhere in the neighborhood of $41 billion. Even as serious as the losses the insurance industry sustained from the more recent Superstorm Sandy were, at an estimated $18.75 billion these figures are less than half Katrina's. With the hurricane season in the Atlantic winding down after the typical June-November season, it may be a good time to take a close look at yourhomeowner’s insurance policy to make sure you understand your specific coverage and that you have the protection you need.

Conventional homeowners insurance almost always includes a deductible amount which, in the case of a claim being made, is required to be paid by the policyholder before any policy benefits are released. In most cases this deductible is a flat fee, agreed upon at the time the policy is drawn up, commonly in amounts from $500-$1000.

If you live in an area affected by frequent windstorms such as the Atlantic Coastal region, your policy may also have an additional wind storm deductible. A windstorm deductible can be designated as a flat, fixed amount such as the deductibles associated with fire and theft, but, more likely, your wind storm deductible will be figured on a percentage basis. The most common percentages for wind storm deductible amounts are between one and five percent and those percentages are figured on the total insured amount of your house, not the amount of damage sustained during the particular event for which a claim is made. This means a house insured for $200,000 and carrying a 5% wind storm deductible will only be eligible to receive claims benefits after the initial $10,000 wind storm deductible is paid by the policyholder.

Don’t Be Taken By Surprise

Hurricane and wind storm deductible clauses are contained in homeowner’s insurance policies in nineteen states plus the District of Columbia. This includes all fourteen states that border the Atlantic Ocean, from Maine down to Florida, plus four Gulf states: Alabama, Louisiana, Mississippi and Texas. The nineteenth state is Pennsylvania. If you live in any of these states, it’s important that you take a look at your coverage to see if yours contains a hurricane or wind storm deductible, whether it’s a fixed dollar amount or percentage-based, and what type of event is considered a “trigger” for it to be enforced. This should be explained on the policy’s Declaration Page.

To make matters somewhat confusing, there are two kinds of wind damage deductibles:

• Hurricane deductibles
• Wind storm or wind & hail deductibles

The basic wind storm deductible may apply to any damage caused by excessively high winds while a hurricane deductible may only be triggered by certain criteria such as the National Weather Service declaring a tropical storm or hurricane by giving it a name or by putting an active hurricane watch in a particular geographic area.

What’s in a Name?

In the aftermath of Superstorm Sandy, the Governors of N.J., N.Y. and CT all announced that hurricane deductibles would not apply to submitted insurance claims. This was because, before making landfall in those states, the Weather Service had downgraded Sandy's status and no hurricane warnings were issued.

While it looked like this simple declaration would save millions of dollars for policyholders, insurance companies with wind storm deductible clauses in effect had the capability of calling these into play. Many policyholders were surprised when they learned the deductible portion of their claims were tens of thousands or more. The bottom line? Check your policy and understand your coverage.