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Sandy’s windstorm insurance worries

By Jay MacDonald ·
Tuesday, November 13, 2012
Posted: 6 am ET

Northeast homeowners may think they're out of the woods because state officials decreed that higher hurricane deductibles won't apply to damage claims on their homeowners insurance resulting from Superstorm Sandy.

Unfortunately, some homeowners are finding that their policies contain a lesser-known "windstorm deductible" that could cost them just as much out of pocket as a hurricane deductible before their homeowners insurance will kick in.

Officials in eight states and the District of Columbia waived the hurricane deductibles in their jurisdictions because the National Weather Service officially downgraded Sandy from a hurricane to a "post-tropical cyclone" before the storm made landfall Oct. 29 near Atlantic City, N.J.

Hurricane deductibles, which are separate from the base-policy deductible that typically runs $500 or $1,000, have become a common exclusion in hurricane-prone regions in recent years. Why? In part, they help keep home insurance premiums and deductibles down while mitigating catastrophic risk to insurers.

The Insurance Information Institute says most hurricane deductibles run 1 percent to 5 percent of a home's value. To put that into perspective, if you have a damage claim and your home is worth $300,000, you could be on the hook for between $3,000 and $15,000 before your homeowners insurance will pay a nickel.

But Insurance Journal reports that some homeowners are shocked to discover another deductible for "windstorm" wedged into their policy language -- and instead of being a flat-fee deductible similar to their base deductible, it too can run 1 percent to 5 percent of home value. What's worse, some are finding that their windstorm deductible may still apply to damage sustained from a nonhurricane-strength storm such as Sandy.

One New York insurance broker who requested anonymity told Insurance Journal that a customer had been denied a $10,000 claim because the damage amount was less than their windstorm deductible, which was 5 percent of their home value. When he followed up with the state, he was told that while hurricane deductibles had been waived, windstorm deductibles still applied.

According to Roz Binday, president of Advocate Brokerage in Scarsdale, N.Y., it's common for State Farm and Allstate -- the region's top two carriers that together insure nearly a quarter of the Northeast market -- to include in their policies windstorm deductibles in the 5-percent-of-home-value range.

However, Binday adds that homeowners insured with some of the other carriers in the region, including Chubb, Fireman's Fund, PURE, ACE and Travelers, can breathe easier because those insurers don't impose any additional deductible beyond the base-policy deductible.

If you've been blindsided by deductibles in your policy, we'd like to hear from you.

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Bob Lupaka
January 08, 2013 at 10:10 pm

We had water intrusion damage during the storm. Our insurer is applying the windstorm deductible which equals $25K. Our initial damage estimate is for $24K. Using WeatherUnderground to lookup the weather data for 4/28 & 29 for our area shows winds at 18 mph, max winds at 26mph, with gusts to 50 mph. Walking up and down the wind ladder of mph what is the actual wind amount that triggers the decutible? 10, 20, 30 or whatever suits the insurer? My policy does not have a mph trigger stated. It should be noted that there was also almost 5" of rain over a 24 hour period.

A Spahija
December 16, 2012 at 1:52 pm

Just got our payout estimate in the mail which equaled $15,000 in damage, but our windstorm insurance needs a minimum of $18,000 in damage due to the 5 percent value of our home, these crooks cannot get away with this? how can the government allow such terrible business practices? these animals have found a loophole in the system and now the people that need to get things fixed cannot because their insurance will not pay them. Something needs to be done.

John leeson
November 24, 2012 at 12:04 pm

What were the governors intending when they waived the hurricane deductible? Were they under the impression that they were saving us from wind deductible also.

Paul Butler
November 18, 2012 at 8:15 pm

The dictionary definition of windstorm is a storm with littl or no precipitation but strong winds. Due to the extensive rainfall delivered by Sandy, the storm does not fall witnhin the meaning of "windstorm" given by dictionaries