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<p class="has-black-color has-text-color has-medium-font-size">If you have a home in a region that has a high hurricane risk, you'd better check your homeowner's insurance policy for the details of its deductible for hurricane-related damage. This relatively new addition to insurance policies is not a flat dollar amount but a percentage of your home's value, and it can add significantly to the financial burden you bear if your home is damaged in a hurricane.</p>
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<p class="has-black-color has-text-color has-medium-font-size">Key takeaways:</p>
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<ul class="has-black-color has-text-color has-medium-font-size"><li>Hurricanes are becoming more frequent and powerful each year with global warming.</li><li>If you live in an area with a high risk of hurricane-related damage, you must be sure your homeowner's insurance covers such hazards.</li><li>Some homeowners will need to purchase a rider or separate insurance to cover losses due to hurricanes.</li></ul>
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<h2 class="has-black-color has-text-color has-large-font-size" id="mntl-sc-block_1-0-4">When the Hurricane Deductible Applies?</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-5">A hurricane deductible applies only to damage from storms categorized as hurricanes by the National Weather Service or U.S. National Hurricane Center. A so-called windstorm deductible applies to any other wind damage. Each insurance company determines its own "trigger"—the event that invokes the hurricane or windstorm deductible.&nbsp;</p>
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<h2 class="has-black-color has-text-color has-large-font-size" id="mntl-sc-block_1-0-7">Katrina Fallout</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-8">When Hurricane Andrew hit southern Florida in 1992, it caused an estimated $25 billion in damage.</p>
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<p class="has-black-color has-text-color has-medium-font-size"><a rel="noreferrer noopener" href="https://www.nhc.noaa.gov/1992andrew.html" target="_blank"></a> Then Hurricane Katrina hit in 2005, causing more than $41 billion in insurance claims. After these disasters, reinsurers, the companies that back up the cost of homeowners insurance for the primary insurance companies, demanded that insurers find a way to lower their claims costs.</p>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-10">The companies developed a new method of calculating how much a homeowner must pay for storm-related insured damage before insurance reimbursement kicks in. This increased the amount the homeowner must pay and decreased the insurer and reinsurer's financial responsibility.</p>
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<h2 class="has-black-color has-text-color has-large-font-size" id="mntl-sc-block_1-0-12">How the Deductible Works?</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-13">A standard homeowner&nbsp;policy provides financial protection against disaster in the form of insurance on the home and its contents. The insurance deductible is the amount of money you must pay toward a loss before your insurance company starts to pay. This is laid out in the&nbsp;policy.&nbsp;</p>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-15">Homeowner policies for properties in areas most likely to be hit by a hurricane may include hurricane and windstorm insurance deductibles as additional requirements beyond the regular deductible.</p>
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<p class="has-black-color has-text-color has-medium-font-size">Tip: If your home is at risk, it is important that you have enough coverage to protect yourself in the event of a serious storm. Your standard homeowners' policy may not cover all hurricane damage, but hurricane policies do supply this protection and often match the coverage of your homeowners' insurance.</p>
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<h2 class="has-black-color has-text-color has-large-font-size" id="mntl-sc-block_1-0-19">When the Deductible Applies?</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-20">Whether or not you'll pay a hurricane or windstorm deductible depends on your insurance company's definition of a trigger event. The deductible will only apply in certain circumstances, which are described in your insurance contract. </p>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-22">Hurricane insurance triggers vary among states as well as among insurers. That's why it's important to&nbsp;review the hurricane insurance details in your homeowner&nbsp;insurance policy. Make sure you have copies of the relevant documents in the emergency bag you keep ready in case you have to leave your home in a hurry.</p>
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<h2 class="has-black-color has-text-color has-large-font-size" id="mntl-sc-block_1-0-24">Calculating Your Deductible</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-25">The amount of the hurricane insurance deductible is calculated as a percentage of a home’s insured value, not as a dollar amount.</p>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-27">For example, a standard homeowners policy with a $500 deductible requires the homeowner to pay the first $500 of insured damage on a claim, regardless of the home’s insured value. However, a hurricane insurance deductible of 5% of a home's worth at a value of $300,000 requires the homeowner to pay the first $15,000 of insured damages.</p>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-29">The typical hurricane deductible is between 1% and 5% of the home's insured value, although policies in some vulnerable coastal areas could have an even higher deductible.&nbsp;</p>
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<h2 class="has-black-color has-text-color has-large-font-size" id="mntl-sc-block_1-0-31">These States Have Hurricane Deductibles&nbsp;</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-32">The following 19 states, plus the District of Columbia, have some form of hurricane or windstorm deductible in place as of 2021: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and the District of Columbia.</p>
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<h2 class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-36">The Bottom Line</h2>
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<p class="has-black-color has-text-color has-medium-font-size" id="mntl-sc-block_1-0-37">Insurance companies started applying hurricane and windstorm insurance deductibles after experiencing massive costs related to storms in the early 2000s. In most cases, these percentage-based deductibles increase the amount the homeowner pays. Homeowners in high-risk hurricane areas should review their insurance policies so they know how much they may have to pay if a hurricane hits.</p>
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<p>To read the full article, <a href="https://www.investopedia.com/articles/personal-finance/071114/hurricane-insurance-deductible-fact-sheet.asp">click here.</a></p>
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