If you live in a coastal state, it’s time to pull out your home owners insurance policy and see if you have a hurricane deductible. This will determine the amount of money you must pay out-of-pocket before your coverage kicks in if there is a hurricane. Hurricane deductibles are clearly listed in your policy, according to the Insurance Information Institute.

“With hurricane season beginning this month and lasting until the end of November, it is important for home owners to determine whether a hurricane deductible applies to their policy,” said Jeanne M. Salvatore, senior vice president and consumer representative for the III. “Hurricane deductibles were put into place to make more private insurance coverage available at competitive rates. With the increase in coastal development, as well as the risk of more severe and costly hurricanes, consumers are now sharing more of the potential catastrophe risk with insurance companies.”

Eighteen coastal states allow insurers to incorporate hurricane deductibles into their home owners policies: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas, and Virginia.

While traditional, standard home owners deductibles for fire, theft, and other disasters listed in the policy are usually a flat dollar amount, such as $500 or $1,000, hurricane deductibles are generally calculated as a percentage and typically vary from 1% to 5% of a home’s insured value.

So, if a home is insured for $300,000 and the policy on the structure has a 5% deductible, the first $15,000 of a claim must be paid by the policyholder in the event there is a windstorm or hurricane strong enough to meet the hurricane deductible threshold as described in the home owners policy.

Hurricane deductibles are triggered only when certain criteria are met (e.g., after the National Weather Service has determined a Category 1 storm made landfall). The hurricane deductible triggers vary by state and insurer and usually apply when the NWS officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity.

Due to these differences, home owners should check their policies and speak to their agent or insurance company representative to learn exactly how their particular hurricane deductible works.

In some states, coastal home owners insurance policyholders may have the option of paying a higher premium in return for a traditional dollar deductible, depending on how close to the shore their residence is situated. In high-risk coastal areas, insurers often require the inclusion of a hurricane deductible before selling a home owners insurance policy.

“Everyone, no matter where they live, should make sure they understand what is and is not covered under their home insurance policy,” said Salvatore. “Home owners who have questions about their insurance policy should contact their insurance agent or company representative. They can explain hurricane deductibles and other parts of the policy.”

Source: Insurance Information Institute