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Tuesday, September 4, 2012

Do You Have a Hurricane Deductible?


Many homeowners in Louisiana who were affected by Hurricane Isaac are probably getting familiar with an aspect of their insurance policies known as a hurricane deductible.

Deductibles are the portion of damage the homeowner pays out of pocket before insurance kicks in. For most “perils,” as the industry calls them, the standard deductible is a flat amount - say, $500 or $1,000. But coastal states from Maine to Texas have special rules for hurricanes, put in place to limit insurance losses after catastrophic storms.

Details vary from state to state, and from insurer to insurer. But generally, when a hurricane (or, in some cases, a named storm) is declared by the National Weather Service, special h urricane deductibles apply for resulting damage. Such deductibles are generally a percentage of the home's insured value, and usually run from 1 to 5 percent. So, for instance, if a home is valued at $300,000, the deductible could be as high as $15,000.

In some areas, homeowners can buy extra coverage - that is, lower their deductible - in exchange for paying higher premiums; some high-risk areas don't offer this option, however, according to the Insurance Information Institute, an industry group.

The institute lists details of hurricane deductibles by state on its Web site.

Hurricane coverage in standard insurance policies generally covers wind damage - both to the home, and to personal belongings - #8212;since many items become projectiles during hurricanes. “If its wind, it's covered - but if it meets hurricane criteria, it's a different deductible,” says Jeanne Salvatore, a spokeswoman for the institute.

Flood damage, however, is covered only if you purchase special flood insurance - generally, from the National Flood Insurance Program, or from some private companies.

Blythe Lamonica, spokeswoman for the Gulf State Insurance Information Center in Baton Rouge, La., said hurricane deductibles apply for damage from Hurricane Isaac in Louisiana. The nonprofit organization, which provides consumers information about insurance in Louisiana, has urged homeowners to review their policies before hurricane season to make sure they know their coverage, she said. Generally, insurers in the state must make the section on hurricane deductibles prominent in written policies, she said, such as by using large type or bold print.

While such deductibles apply, they can be enforced only once a given year. So if a second hurricane were to hit, standard deductibles would apply, she said.

Have you had to pay for a hurricane deductible? How much did it cost you?