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Tuesday, October 30, 2012

A Refresher on Hurricane Deductibles and Flood Coverage

A man in New York City sweeps water out of his apartment after Hurricane Sandy.Getty ImagesA man in New York City sweeps water out of his apartment after Hurricane Sandy.

If you were affected by the wrath of Hurricane Irene last year you may already know this, but it bears review in the wake of Hurricane Sandy: Damage caused by surging storm water generally isn't covered by your homeowner's or renter's insurance policy.

Rather, you'll only have coverage if you purchased a separate flood insurance policy, either from the National Flood Insurance Program or a handful of private firms.

The national flood policy covers damage for up to $250,000 to the structure of your home, and $100,000 for personal possessions. Note that the NFIP policy prov ides “replacement” cost coverage for the structure, but only “actual cash value” coverage for your belongings.

Damage from wind, however, is covered by homeowner's insurance policies-but it's likely subject to a special “hurricane deductible,” which is different from the policy's standard deductible. Coastal states from Maine to Texas have special rules for hurricanes, put in place to limit insurance losses after catastrophic storms. Details vary, but in general when a hurricane (or, in some cases, a named storm) is declared by the National Weather Service, special hurricane deductibles apply for resulting damage.

The standard deductible is usually a flat amount-$500 or $1,000, for instance. But hurricane 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.

Please let us know what conversations you've had with your insurance companies so far in the wake of Sandy.