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(But Not Against High Water)
With over two million insurance claims filed and covered damages
estimated at over $23 billion, the 2004 hurricane season ranks second
only to the 9/11 terrorist attacks as the worst disaster in American
history in terms of recorded property damages and losses. To further
illustrate the devastation caused by Hurricanes Charley, Frances, Ivan
and Jeanne: the above numbers, issued by the Insurance Information
Institute after the fourth of the season’s hurricanes had blown out to
sea, are for wind damage only.
As the one in five Florida homeowners who have filed claims for damages
sustained during the 2004 hurricanes have surely discovered by now, loss
due to flooding is another problem entirely. With coverage provided
through the National Flood Insurance Program (which functions under the
auspices of the Federal Emergency Management Agency and is now a
division of the Department of Homeland Security), floods and any
resulting water damage are government matters, separate from
privately-insured wind loss claims and carrying a separate price tag of
several billion dollars for the 2004 hurricane season. (Important
information about federal flood insurance coverage can be found on pages
2 and 3). Whether you live in Florida, anywhere along the U.S. coastline
or in any inland location, the 2004 hurricane season should serve as a
reminder that hurricanes are measured by wind speed, and that wind - not
water - is what counts when damages to your home are added up under your
homeowners’ policy.
 In
most states along the East Coast and Gulf Coast, as well as in Hawaii,
homeowners’ insurance policies are issued with hurricane
deductibles* (also known as “wind” deductibles in Florida).
Hurricane deductibles are separate from any other deductibles required
under homeowners’ policies and are applied separately to the wind
damage caused by each separate storm system (except in Florida where new
legislation provides that only one hurricane deductible will apply to
all hurricane losses occurring during the same calendar year). Your
hurricane deductible - that is, the amount you must pay toward
covered losses resulting from wind damage to your home before your
homeowners’ policy begins to pay for damages - may be either a flat
amount or calculated as a percentage of the dollar amount of coverage on
your home. For example, if your house is insured for $250,000 and has a
5% hurricane deductible, you would be responsible for paying the first
$12,500 of covered windstorm (hurricane) damage. Through special
insurance programs designed for clients with homes valued in excess of
$1 million and for homeowners’ associations, favorable, flat fee
hurricane deductibles may be available to BWD clients.
*States with hurricane deductibles are
Alabama, Connecticut, Florida, Georgia, Hawaii, Louisiana, Maine,
Maryland, Massachusetts, Mississippi, New Jersey, New York, North
Carolina, Rhode Island, South Carolina, Texas, Virginia and Washington
D.C.
(Insurance Information Institute, August 2004)
Hurricane coverage - and hurricane deductibles - go into effect when
certain storm criteria are met. These criteria vary from state to state.
For example, wind deductibles in Florida go into effect as soon as a
hurricane watch or warning is issued for any part of the state by the
National Hurricane Center of the National Weather Service. In New York,
insurers use the National Weather Service’s Category One Hurricane or
Category Two Hurricane status (based upon a specific mile per hour wind
speeds) as the deductible trigger.
Just as hurricane deductibles and definitions vary from state to state
(and from insurer to insurer), so may the costs and coverages applicable
under various homeowners’ policies. In general, premiums are based on
the policy amount, the location of the home, the type of construction or
building materials used, and comparable property values. Discounts or
credits may be issued for homes built in areas that maintain strict
building codes and code enforcement procedures requiring sturdier
construction, and/or for homes in which safety features such as
hurricane shutters or impact - resistant windows have been installed.
Most standard homeowners’ policies cover repair or replacement costs
for wind-damaged property, the cost of temporary repairs to prevent
further damage following a covered storm, as well as reasonable living
expenses if windstorm damage makes your home uninhabitable. Although
damage due to flooding is not covered by homeowners’ insurance, if
water damage occurs as the result of wind-driven rain (for example, if
the wind destroys your roof and then the rain destroys your furniture
and flooring), repairs and replacements will be considered covered
expenses under the terms of your homeowners’ policy (subject to the
hurricane deductible and up to the policy limits). Your homeowners’
policy may also provide limited benefits toward other types of expenses
related to windstorm damage and resulting power outages (such as food
spoilage or mold remediation expenses). |
