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Health & Fitness

What You Need to Know about Hurricanes and Home Insurance

The difference between wind deductibles, and how they affect your wallet after a storm.

How are you affected by a hurricane, or more to the point, how is your homeowners insurance policy going to handle a claim that is the result of a hurricane?  Will your standard deductible of $500, $1,000 or $2,500 cover it?  Will it be a higher specific limit because it's  a "major storm"?  What is a major storm? Does it need to be named? Does it have to be a specific category? These are all real concerns when looking at how your homeowners insurance is going to cover you if and when you have a real loss from a major storm.

It's always a good idea to periodically review your policy. Are your coverage limits are correct? Building costs change and if you don't update the value of your home, no one will. Find the insuring agreement to see what your are specifically covered for lightning, theft, fire, explosion etc., in the exclusions section you'll find what you aren't covered for flood, intentional destruction of property etc, and finally in the conditions section you'll find what your duties are in the event of a loss. Find your deductibles. What is your "wind deductible"?  This is the factor that is going to play a major role in the event of a large storm that causes serious or catastrophic damage. 

Wind deductibles are expressed as a percentage. Those percentages are usually 2 percent, 3 percent and 5 percent, the policy will usually state that percentage as a dollar amount as well, i.e. $15,000. But what does this mean?  It means quite simply that in the event of a major storm you are responsible for that percentage of the damage to your home and then, only after that number has been reached, will the insurance take effect. 

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Let's say your house is insured for $500,000.  A 2 percent wind deductible would mean that you are responsible for the first $10,000 worth of damage to your home in the event of a major storm.  In that same storm with a 5 percent wind deductible you  would be responsible for the first $25,000 worth of damage.  As you can see, this little number can make a big  difference in what you have to pay out of pocket when things go really wrong. 

Unfortunately nothing is that cut and dry. When you are comparing different policies and trying to decide which is best, you need to ascertain when each companies wind deductible kicks in.  Yours may be effective as soon as a storm is named, which means that tropical storms and depressions are fair game.  It may become effective as soon as it is categorized as a hurricane, and it may not be effective until it is at least a category 2 hurricane.  There are others still that apply to any windstorm whatsoever.  Needless to say it's a good idea to know what you have. 

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This is where a little math and an agent to help you figure it all out really comes into play.  Let say policy 1 has a 3 percent deductible for any storm classified as a hurricane when it makes landfall,  policy 2 has a 5 percent deductible for any storm that is a Cat 2 hurricane when it makes landfall and policy 3 has a 2 percent deductible for any named storm. 

Which is better?  Well, not accounting for the cost of the policies, for any hurricane that is a Cat 1, policy 2 would be better because it would only require your standard deductible whereas policy 1 would require you to be responsible for the first $15,000 and policy 3 would require you to pay $10,000.  You've essentially saved $14,000 and $9,000 respectively with policy 2 assuming a loss that exceeds that value.  For a Category 2 hurricane, it may appear as though Policy 3 has the advantage as it will only require 2 percent before the company will start paying.

This is only part of what you need to think about when deciding on a possible policy for your home.  The frequency of the storms that affect our area should also be considered, as it can have an effect on how often you are paying out your wind deductible or your standard deductible.  We did a little research on the subject and came up with the following statistics. 

Since 1900 the east end of long island has been directly* impacted by 30 named storms.  Of those storms, 63.3% were tropical storms or less by the time they hit us, 26.6 percent were category 1 and 10% were category 2.  We have not been hit directly with a category 3 hurricane in that time period.  Even the great hurricane of '38 was right on the line between a tropical storm and a cat1 hurricane when it hit Long Island.  It was however traveling at a high rate of speed (over 70mph) which accounted for recorded wind gusts of 185mph.

Given this information, don't discount  the other factors involved which include the cost of the actual policy (if you are paying thousands more for a low wind deductible you may actually be losing money in the long run), whether or not the company holding the policy is admitted or not, how long have they been in business and what is their history  in regards to responding to claims.  Also take into account who your agent is.  Are they someone that you feel you can trust?  Do they have your best interest at heart?  Do they seem like they know their product and can explain everything to you in a way that makes sense?    

Dig out your policy, review your coverage's, make sure that you have what you want , what you need and what is right for your home and your financial situation.  Don't wait for hurricane season, or for a large storm to be marching up the coast, do it soon so you have the time to be able to make a well informed decision that will provide you with the best possible coverage at the right price with the right deductibles for you.

If you have any questions or concerns about your current policy, feel free to call us anytime.  We would be happy to sit down with you, review your policy and explore the possibilities that are available and appropriate for your home.

*These were storms that made landfall on Long Island and their category at the time of landfall.  Most of those storms were many times more powerful at their peak, but lost power as they tracked north into cooler waters before impacting our area.

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