On Property Insurance Claim Tips Blog

Policyholder Question on Changing Hurricane Deductible

Q. Could one choose to have a larger deductible on hurricane insurance? For example; a 20% or 30% deductible on a $100,000 home? What would be the savings as opposed to a 10% deductible?

A.I suspect this is one issue that will be on a lot of people’s minds after Super Storm Sandy and the expected increase in property insurance premiums that are likely to follow.

If I may, a little history from our Florida experience. Before Hurricane Andrew in 1992 there were no wind percentage deductibles, except for some limited high risk pools, primarily in a few counties in Southeast Florida. After Andrew they became ubiquitous. Post loss underwriting is a common business practice with many insurance companies and these percentage deductibles are a classic example. Having said that, most insurance companies are required to submit forms to their state insurance departments for approval. As an example, in Florida a 5% wind deductible is the cap that is allowed on admitted homeowners carriers. Surplus lines (non-regulated as to rates and forms) who are not admitted but still have a license to sell in a state can offer higher percentage deductibles. You need to check with your state department of insurance to see what has been approved. I would caution you against high wind percentage deductibles if you are in a high wind zone. Basically, you are self insuring for the amount of the deductible and other policy terms and conditions that apply may make you a larger self insurer before you see one dollar of your insurance companies money for your wind loss. Please make sure you can handle the financial risk. Good luck

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