With more storms brewing, it might be time to check your hurricane deductible.
It’s the time of year where homeowners on the Gulf Coast may be double-checking their insurance policies, especially considering last week’s near-miss with Hurricane Sally.
To protect against strong winds from tropical storms, those policies may include hurricane deductibles. The coverage goes into effect when any part of the state is placed under a watch or warning for a named storm by the National Hurricane Center.
Unlike many other lines of coverage, the deductible a property owner is responsible for after a hurricane is tied to property value rather than a set dollar amount. The standard hurricane or wind storm deductible in Mississippi is 2% of the property’s value.
That exclusively covers damage caused by a storm’s wind — any damage from floodwaters or storm surge would need to be covered under a separate policy.
Insurance for flood damage is generally covered by separate policies underwritten by the National Flood Insurance Program and available through insurance company or independent agents.
A storm would likely need to be a high-wind Category 2 or a Category 3 for homeowners to receive any payout from their hurricane coverage, Mike Chaney, Mississippi’s insurance commissioner, wrote in an email to the Sun Herald. That would mean sustained winds around or above 100 miles per hour.
“Think about a $150,000 home with roof damage and a 2% deductible that equals $3,000,” Chaney wrote. “That is about what a new roof repair would cost.”
As of 2018, State Farm held the largest market share of Mississippi homeowners insurance policies with just over 26%, according to information published by the National Association of Insurance Commissioners. State Farm offers a 1% buyback policy, Chaney wrote, allowing property owners to pay an additional premium that would effectively cut their deductible in half.
Insurance companies started requiring hurricane deductibles after Hurricane Andrew devastated South Florida in 1992, according to the Insurance Information Institute, which counts more than 60 insurers as members. The push became more pronounced after Hurricane Katrina, when reinsurance companies, or the companies that insure insurance providers, began to demand that providers decrease their losses.
“It’s a very standard practice across the industry and certainly standard in all Gulf Coast and Atlantic states, so it’s not anything that’s new,” Mark Friedlander, the Insurance Information Institute’s director of corporate communications, told the Sun Herald.
Homeowners can decide whether to have coverage for wind damage, Friedlander added, but the insurance trade group recommends that those in hurricane-prone areas always carry the coverage.
“Wind storm damage during a hurricane can be so significant — can be catastrophic (up to) where you literally have to replace the entire home,” Friedlander said.
Terms of the hurricane deductible will be outlined on policy holders’ declaration page, Friedlander added, the one-page summary of everything a policy covers and how to make a claim.
People living on the Coast and in flood-prone areas should, he said, have copies of their insurance policies and their agent’s contact information in their disaster kits. The trade group also recommends that homeowners keep a home inventory on a flash drive, something that could be as simple as taking pictures of every room inside the property and of a home’s exterior.
And after a storm, Friedlander always recommends filing a claim.
“Go through the process with your insurance carrier, with your agent. File a claim and have the adjuster determine what the loss is because you never know what the specific damages will amount to,” Friedlander said. “If it looks minor, it’s still possible it will be above the threshold for the deductible.”