How Do Insurance Deductibles Work During Hurricanes?

Posted by on July 26, 2013 in Hurricane Awareness, Tips and Tricks | Comments Off on How Do Insurance Deductibles Work During Hurricanes?

insurance policy and deductibles

When searching for the right insurance policy to protect your home against costly hurricane damages, you may come across company advertisements touting¬†“low deductibles.” Insurance companies promote this policy factor as a great benefit to customers. But what exactly are deductibles, and how do they affect you?

What are Deductibles?

When a hurricane strikes, property-owners file claims to receive compensation for any related damage. However, this funding generally comes with a fee called a “deductible” that you must pay upfront. Policy-holders must cover the amount of the stated deductible before receiving financial aid. Here’s an example of how it works:

If you have $100,000 covered in your insurance policy and a 5% deductible, you must cover $5,000 worth of the damage yourself before the insurance company will pay the remaining costs. 

Some insurance policies have a direct amount to be paid before instead of a percentage. For instance, a deductible could be set at $600 of whatever policy you may have. The lower the deductible, the less you would have to pay out-of-pocket for losses. However, it is important to note that these amounts may vary depending on the type of natural disaster and damage.

When are Deductibles Adjusted?

Hurricane deductibles apply when a storm makes landfall as an actual hurricane, with sustained winds of at least 75 mph or greater. If an area faces only a tropical storm, deductibles are generally not required.

In the case of Hurricane Sandy, many states faced the storm after it had been downgraded to a tropical storm. Therefore, many residents were able to save thousands of dollars by not having to pay this extra fee. Sounds great, right? However, many policies had excluded damage from winds, and tailored these losses to require even larger deductibles from policy-holders.

According to reports, regulations in New Jersey called for these high deductibles even if the wind damage was not related to the storm. Some policies even account for “anti-concurrent causation clauses” which claim that damages occuring simultaneously, or as a result of one another, will not be covered.

Homeowners should be aware of which factors are included or excluded in a policy and note any policy deductibles before determining which policy best suits their case. Know your policy coverage to avoid any surprise fees during the stressful times of hurricane or storm aftermath.