There are few documents more challenging than insurance policies. If you feel your eyes crossing while you read one, don’t fret: it’s not you. Insurance policies, it seems, are designed to be difficult to read, because if you don’t quite understand the fine print, then insurers may have an easier time keeping your money than paying out on your claim.
Today, we want to take a look at how deductibles work when you sustain losses in a hurricane.
What is a deductible?
A deductible is the money you are responsible for paying before your insurance kicks in. The insurance company will subtract – or deduct – your deductible from the total payout. Deductibles can be a set amount of money (like $1,000) or a percentage of your coverage (like 1%), depending on the policy.
Hurricane deductibles vs. standard deductibles
In some states, like Florida, Alabama, and Louisiana, there is a separate deductible for named hurricanes. Each state has different rules about when and how those deductibles kick in. These are called “trigger events.” In Alabama or Louisiana, trigger events are determined by the insurance company. In Florida, the trigger event starts “from the time a hurricane watch or warning is declared for any part of the state, until 72 hours after the watch or warning ends and hurricane ‘conditions’ exist in the state.”
Depending on where you live and what the weather report is, you may be required to file a claim with the hurricane deductible, and that can cost you significantly more. In Florida, for example, property owners may be offered a $500, 2%, 5%, or 10% deductible based on their coverage. (The percentage is of the total coverage.)
An example of how a deductible works
Say your home is insured for $300,000, and you have a 1% deductible ($3,000). If your home is destroyed in a fire, your insurance company should pay you for the full amount of your claim, minus $3,000. (Whether or not they actually do is another matter – one we’ve been fighting back against for years on behalf of policyholders.) So, if your claim was for $100,000, you should get $97,0000.
But if your home is destroyed in a hurricane, then your hurricane deductible kicks in instead. In Florida, that means you may have a deductible of $15,000 (5%) or $30,000 (10%), which reduces the amount of money you could be paid on your claim. On a $100,000 claim, you may only receive $85,000 or $70,000 from your insurance company.
The silver lining – if one could call it that – is that Florida only requires you to pay your hurricane deductible in full once per season. So, if you sustain damage from multiple hurricanes, you do not need to keep paying out the full amount of your hurricane deductible in every claim.
Do hurricane deductibles apply when flooding causes damage?
Flood insurance is a different policy, so a different deductible would apply. Flood insurance deductibles are set by your lender, and there are two different deductibles for flood claims: one that covers the structure, and one that covers what’s inside of the structure. If you don’t have contents coverage, then your “stuff” won’t be covered by the flood insurance OR your standard homeowners’ insurance.
Problems with flooding during a hurricane
There are two potential problems you may face if your home floods during a hurricane.
First, not all homeowners are required to buy flood insurance. In fact, if you live in an area that is not considered a flood zone, you would have to purchase a separate policy through your insurance company (as opposed to through the National Flood Insurance Program), and the price of that policy can be substantial.
You may be entitled to relief through the Disaster Loan Program of the Small Business Administration, but that requires a federal disaster declaration (which may not be forthcoming) and can take months before it kicks in. Furthermore, it only applies to primary residences, and you still have to pay that money back.
Second, some insurers may try to claim that damage and losses were not the result of the hurricane, but of the flooding or storm surge. In this case, your claim could be denied entirely.
What is the deductible if wind or hail caused losses during a hurricane?
Wind and hail may not be covered under your hurricane policy, and that means you may need to pay multiple deductibles on multiple properties. For example, say you own a warehouse and a retail store that sells whatever is stored in that warehouse. Both buildings are damaged by wind and hail. If the damage occurs before the hurricane warning, hurricane policies don’t apply. If it occurs more than 72 hours after the hurricane warning expires, hurricane policies don’t apply. That means you could be on the hook for two separate deductible – ones for each building – if you sustain wind or hail damage.
However, if wind and hail occur during the covered time period, then you may be able to use your hurricane insurance instead. It can get a little complicated, but we can help you figure it out.
Should I choose a plan with lower deductibles and higher premiums?
There are pros and cons to a plan with higher premiums but lower deductibles. If you live in North Alabama, a lower deductible might not be right for you because hurricanes don’t really whip through that part of the state – although after Hurricane Ida, we see it is possible for a storm to travel. If you live on the Gulf Coast, a higher premium may be better option if you can afford it, because you’re more likely to make multiple claims a year for damage.
The two things we know for sure are:
- You should always buy as much insurance as you possibly can, especially if you live in an area that’s prone to flooding, hurricanes, and/or tornadoes.
- When your insurance company gives you the runaround, you want a Warhurst Warrior on your side to fight back.
Warhurst Law fights for policyholders throughout the Gulf Coast and the Panhandle. If you are being pushed around, we can help you fight back. Please call 251-207-1296 or complete our contact form to schedule a consultation. Proudly serving Alabama, Florida, and Louisiana.
At Warhurst Law, we understand the immediacy of your situation. We also understand that insurance companies aren’t looking out for your best interests; they’re looking out for their bottom lines. Whether you’ve lost a building in Hurricane Michael or saw your home destroyed by a tornado or wildfire, or suffered life-altering injuries in a car wreck, Warhurst Law wants to help you get the compensation you need, so you can get back to your life.