insurance

5 reminders from Sandy: Hurricane deductibles

5 insurance reminders from Superstorm Sandy
Hurricane deductibles

Sandy has been a wake-up call for people in 18 coastal states and the District of Columbia who didn't realize that homeowners insurance policies in their region may include a special and separate deductible just for hurricanes.

A standard home insurance deductible typically is a straight $500 or $1,000. But hurricane deductibles can be much steeper, ranging from 1 percent to 5 percent -- maybe more -- of a home's insured value.

If your home is insured for $200,000 with a 1 percent hurricane deductible, you'd be responsible for paying $2,000 of the storm's damage.

The hurricane deductibles became controversial during Sandy when governors of several states prohibited insurers from imposing them. The governors pointed out that, technically, the storm didn't hit land as a hurricane but as a post-tropical cyclone.

Insurers may have to rename their "hurricane deductibles," says Loretta Worters, a vice president with the Insurance Information Institute.

"Some states use named-storm deductibles instead of hurricane deductibles or certain wind speeds, so there is still some discussion with this issue," she says.

The deductibles are intended to keep the cost of insurance lower in coastal areas, Worters notes.

Check how your deductible is worded.


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