Sandy’s windstorm insurance worries

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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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