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Everything You Need to Know About Hurricane Insurance

When a hurricane’s lashing rain and whipping winds threaten your home, the last thing you want to worry about is whether you’re financially protected.

Hurricane season runs from June 1 to November 30 every year in North America.. This six-month period is when homeowners are most likely to see a named storm make landfall.

Hurricanes can range in intensity and destruction. While some homeowners insurance policies do offer coverage from hurricanes as a covered peril, some regions of the country are at higher risk from hurricane damage.

Some lenders in hurricane-prone regions in those areas are requiring homeowners to carry additional coverage to protect against losses from hurricanes. Here’s what you should know.

What Is Hurricane Insurance?

Technically speaking, hurricane insurance isn’t a specific type of policy (like earthquake insurance, for example). It is separate coverage you can purchase that protects against the two primary types of damage caused by hurricanes: flooding and windstorm damage.

Standard homeowners insurance policies do not cover flooding, which is generally defined as water that enters the home after touching the ground first. This includes things like coastal storm surges and heavy rainfall that causes lakes, rivers and streams to overflow their banks or a levee to fail.

Because flooding is a common side effect of hurricanes, anyone who lives in an at-risk region should also consider purchasing flood insurance. This is true even if the home is not in a federally designated flood zone. When Hurricane Harvey hit Houston in 2017, nearly 80%  of the homes that suffered flood damage did not carry flood insurance. Because standard homeowners insurance doesn’t cover flood damage, these homes were unprotected.

If you live in a region where hurricanes are common, your homeowners insurance policy might either have limits on windstorm damage — or it might not cover it at all. You will need to purchase a separate rider or additional policy to protect your home against windstorm damage. In some states, this coverage may be available through a state-run insurance pool.

What Does Hurricane Insurance Cover?

Most standard homeowners insurance policies will cover wind damage and destruction caused by wind-driven rain. This means that if a storm blows shingles off your roof and rain gets in, your homeowners insurance policy will cover the damage. Because hurricanes can devastate large areas, insurance usually comes with lots of restrictions on what homeowners can claim. It’s extremely important to know exactly what your homeowners policy covers

How Do Hurricane Insurance Deductibles Work?

Because some states are more susceptible to hurricane damage, insurance companies now sell homeowners insurance policies with separate deductibles that apply to hurricane claims.

 In 19 states that are prone to hurricanes, standard homeowners insurance policies carry a separate hurricane deductible — in addition to the standard deductible.

These states include:

  • East: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Virginia and Washington, D.C.
  • South: Alabama, Georgia, Louisiana, Mississippi, and Texas
  • West: Hawaii

Each of these states has different deductibles and windstorm policies, and state insurance regulations can change. If you live in one of these states, talk to your agent or state insurance commission office to learn more about which hurricane deductibles apply.

A standard deductible is typically a set dollar amount, such as $500. This means that if there’s an electrical fire, for example, the homeowner is responsible for the first $500 of repairs. The insurer then pays the rest of the claim.

A hurricane insurance deductible is typically based on a percentage of the home’s insured value. If a home is insured for $250,000 and has a hurricane deductible of 5%, the homeowner is responsible for the first $12,500 of a claim resulting from hurricane damage. A 2% hurricane deductible on the same property would mean a homeowner is responsible for the first $5,000 of the claim.

If you live in a coastal state, check the declarations page of your homeowners insurance policy to find out if you have a separate hurricane deductible. As noted above, almost every coastal state from Maine to Florida has some form of hurricane deductible included in a homeowners insurance policy.

Hurricane Insurance Definitions

The jargon you’ll come across when exploring hurricane coverage can be confusing. Here are some important terms you should know:

Deductible: This is the amount you are responsible for paying when you submit an insurance claim.

Mandatory deductible: This is a rate that is set by an insurance regulator — usually at the state level or by insurance rules or laws.

Percentage deductible: These deductibles are determined using the insured value of a property. Hurricane deductible percentages can range from 1% to 5% of a home’s insured value.

Named storm deductible: This kicks in if your home is damaged during a storm that was named by either the National Hurricane Center or the National Weather Service. If your policy contains this phrase, make sure you understand what the specific “trigger event” is.

Trigger events: – These can vary widely from state to state — and even from one insurance company to the next — but they are important to understand. Some are dependent on timing, such as damage that occurs before a storm is named or after it makes landfall for a set period of time. These trigger events will determine when and if a hurricane deductible applies.

Storm classificationsaccording to the National Hurricane Center: These can be included in trigger-event definitions that will affect the type of deductible you will pay if your home suffers storm damage. You should pay close attention to your insurance policy to see what is covered.

  • Tropical depression: The first stage of a storm that has potential to develop into a hurricane with winds up to 38 mph.
  • Tropical storm: If the winds from a tropical depression increase to 39 mph, it is recategorized as a tropical storm.
  • Hurricane: If a tropical storm continues to grow and its winds increase in speed to more than 74 mph, it is recategorized as a hurricane.
  • Hurricane intensity: A storm’s strength is measured on the Saffir-Simpson wind speed scale, with intensities ranging from one (74 to 95 mph sustained wind speed) to five (wind speeds of 157 mph or higher).
  • Hurricane watch: This is issued when a storm system poses a threat to coastal areas.
  • Hurricane warning: This is issued when a storm is predicted to reach landfall in a coastal area within 24 hours.

Who Pays for Hurricane Damage?

Hurricane damage can be extensive, and who pays can depend heavily on what types of insurance coverage a homeowner carries. If heavy rain causes flooding that damages your home — and you don’t have flood insurance — the financial burden could land entirely on your shoulders.. The Federal Emergency Management Agency (FEMA) may offer help in the form of disaster relief, but this can be limited.

If the hurricane damage is the result of wind, you’ll be responsible for the deductible, and your homeowners insurance will cover the rest (depending on the details in your specific homeowners insurance policy). The amount you owe will depend on whether or not you are subject to a hurricane deductible, your home’s insured value and if the storm meets the definition of a trigger event in your policy.

One More Thing to Watch Out for

Make sure to check your homeowners insurance policy for loss-of-use coverage, also known as insurance for additional living expenses. If you have to live elsewhere while your home is rebuilt or repaired, you’ll want to be sure you understand what living expenses are covered by your insurance.

The Bottom Line

There are many factors that contribute to hurricane losses, from population growth in coastal states leading to more buildings to stronger and more frequent storms. Of the top 10 costliest hurricanes in the U.S., nine occurred between 2004 to 2018 —  three of which happened in 2017 alone (Harvey, Irma and Maria).

With such expensive damage, insurers are trying to address the increased risks associated with hurricanes — while still offering the coverage that individual homeowners need. This can result in complex policies that have different deductibles. It’s up to homeowners to make sure they understand what is covered.

Speak with your insurance agent and revisit your declarations page to make sure you have the appropriate coverage for the possible risks in your area.

Disclaimer:

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