With Hurricane Sandy bearing down on the Northeast and promising to cause all kinds of damage, it’s a good time to review your homeowner’s insurance policy. Hurricane Sandy is likely to cause insured losses of $5 billion to $10 billion and economic losses of $10 billion to $20 billion, disaster modeling company Eqecat said on Monday.
According to the Insurance Information Institute, there are two kinds of wind damage deductibles: hurricane deductibles, which apply to damage solely from hurricanes, and windstorm or wind/hail deductibles, which apply to any kind of wind damage. Percentage deductibles typically vary from 1 percent of a home’s insured value to 5 percent. In some coastal areas with high wind risk, hurricane deductibles may be higher.
The amount that the homeowner will pay depends on the home’s insured value and the “trigger” selected by the insurance company, which determines under what circumstances the deductible applies. In some states, policyholders may have the option of paying a higher premium in return for a traditional dollar deductible, depending on how close to the shore they live. In some high-risk coastal areas, insurers may not give policyholders this option, making the percentage deductible mandatory. For example, on a house that’s valued at $200,000 with a five percent deductible, the homeowner would pay $10,000 out-of-pocket.
You also need to keep in mind that many policies have unique deductible rules in the event of hurricane damage. In the past several years, an increasing number of insurers that operate on the East and Gulf coasts have instituted a second set of deductibles that apply only when an area is hit by a hurricane.
The 18 states that allow insurers to include hurricane deductibles in their homeowner’s policies include many, but not all, of the states that are in Sandy’s way. Specifically, hurricane deductibles are allowed in Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, South Carolina and Rhode Island. The District of Columbia is also subject to hurricane deductibles.
If you have a percentage deductible, you should review your policy to see what triggers that deductible. ‘Triggers’ vary from policy to policy and state to state.
When Hurricane Sandy makes landfall, its sustained winds are likely to be no stronger than 75 or 80 miles per hour, but it will bring with it a powerful storm surge. This surge is literally a wall of water that comes ashore and can do catastrophic damage to homes and businesses. For those who are inland, Sandy’s torrential rains could create floods all over the Northeast.
“A flood insurance policy is relatively inexpensive and anyone should be able to purchase flood insurance, in the maximum amount of $250,000, through the National Flood Insurance Program (NFIP) for an annual cost of approximately four hundred dollars,” says Attorney Mark Schecter, President of Schecter Law, P.A., a real estate law firm located in Broward County, Florida.
A standard flood policy will cover structural damage to your home, including damage to your furnace, water heater, air conditioner, floor surfaces (carpeting and tile) and debris clean up.
Generally speaking, it is recommend that you review your homeowner’s insurance policy once a year to determine what type of coverage you have and what you may need. “Just make sure your insurance policies are in full force and effect,” says Schecter.