What is a hurricane deductible?
A hurricane deductible is a special out of pocket cost you must pay before your insurance covers wind damage from a named storm. The insurance industry created this specific term in the 1990s after major coastal storms caused massive financial losses. It separates everyday wind damage claims from catastrophic weather events. If a regular spring thunderstorm blows off a few shingles, your standard flat dollar deductible applies. But if a named hurricane destroys your roof, this special higher deductible takes over. Insurance companies use these deductibles to shift some of the financial risk back to the homeowner. You'll usually see this requirement if you live in a coastal state along the Atlantic Ocean or the Gulf Coast. If you live inland but still in a hurricane path, you might have a similar requirement called a windstorm deductible.
How insurance companies calculate it
Unlike a standard deductible of 500 or 1,000 dollars, a hurricane deductible is a percentage of your home value. Insurance companies calculate it as a percentage of your dwelling coverage limit. This percentage usually ranges from 1 to 5 percent. Sometimes it can go up to 10 percent for homes sitting right on the beach. Keep in mind this percentage is based on the insured value of your home structure, not the real estate market value or the price you paid for the house. The dwelling limit is simply what it would cost to rebuild your house from the ground up. If you upgrade your home and increase your dwelling coverage, your deductible amount automatically goes up as well.
When the deductible actually kicks in
Insurance companies have strict rules about when this higher deductible applies. These rules are called triggers. Read your Home Insurance policy carefully to learn your exact triggers, as state laws often dictate them. Common triggers include:
- The National Weather Service officially names a tropical storm or hurricane.
- A hurricane watch or warning is issued for your specific county.
- A specific wind speed is recorded in your area.
The deductible usually stays in effect for a specific time frame. This time frame might start the exact moment a watch is issued. It typically ends anywhere from 24 to 72 hours after the storm officially passes or is downgraded. If a severe storm hits your town before it gets an official name, your standard deductible might apply instead.
What it covers and what it excludes
A hurricane deductible only covers wind damage and rain that enters because the wind broke your home open. For example, if wind rips off your Roofing and rain pours in, this deductible applies to the repairs. However, it completely excludes water damage from storm surges, overflowing rivers, or ground flooding. You need a completely separate flood insurance policy for rising water. You can't combine the two. If a hurricane brings both wind and a storm surge, you might have to pay your hurricane deductible for the roof damage and a separate flood deductible for the ruined floors.
How to prepare your finances
When you prepare for Home Emergencies, you must plan for this large out of pocket cost. Many homeowners are shocked by the massive bill after a major storm. You should keep enough cash saved in an emergency fund to cover that full percentage. If you don't have 10,000 to 20,000 dollars sitting in the bank, you have a few options. Some states allow you to pay a higher monthly premium to lower your hurricane deductible to a 1 or 2 percent rate. Review your policy documents every spring before hurricane season begins so you know exactly how much cash you would need to rebuild.
