Hurricane Insurance: Coverage and Exclusions
For those who have lived in a hurricane-prone area for any length of time, you likely are on a first name basis with at least one storm. Whether it was Donna or Irma, Andrew or Harvey, one thing is certain; homeowners quickly learned the limitations of their insurance policy.
There are many areas of the Southeast United States who have not experienced a landfalling hurricane in many years. If you live in one of these locations or moved to a recently struck town, understanding hurricane insurance is an important step in protecting one of your most valuable assets – your home.
Hurricane Insurance Doesn’t Exist
Yes, you read the headline correctly. Nowhere in the insurance marketplace will you find a hurricane insurance policy. This is because hurricanes by themselves do not cause damage. It is weather created by these massive storms that do.
More specifically, the risk or causes of loss from a hurricane are called perils. In a standard homeowners policy, the following perils are covered:
- Wind and hail
- Water damage
- Falling objects
- Fire and smoke
- Lightning strikes
- Vehicular damage
- Weight of ice or snow
For your homeowners policy to respond to a claim, damage to your home must be caused by one of the policy’s stated perils. The list above may appear to be comprehensive enough to cover any damage from a passing hurricane. Unfortunately, you may be sorely mistaken.
Wind and Hail
The perils of wind and hail, whether generated by a hurricane or not, are indeed covered by a homeowners insurance policy. What may be a surprise, however, is claim payments may be subjected to a different deductible than the rest of your policy.
In geographic locations highly susceptible to hurricanes, a separate deductible may apply to damage caused by one. This is true even if a hurricane doesn’t make landfall or pass directly over your home. Once a storm is declared a hurricane by the National Oceanic and Atmospheric Administration (NOAA), hurricane deductibles will be triggered.
Hurricane deductibles commonly are applied on a percentage basis. Hurricane deductibles of 1%, 2%, and even 5% are common. The deductible is applied to the limit of insurance stated in your policy.
For example, a homeowner with a 2% hurricane deductible on a $300,000 policy would be required to pay the first $6,000 of any hurricane damage. So, just because your insurance policy covers wind damage from hurricanes, there is the potential for the cost of minor damage to fall below your deductible, resulting in little to no coverage at all.
There are different types of water damage. This is the insurance industry after all, and insurance contracts are very specific on what type of water damage is covered. Let’s begin with water damage resulting from flooding.
In almost every policy, damage from flooding is specifically excluded. The definition of flood, for insurance purposes, is rising water occurring on two or more adjoining properties. Hurricanes Katrina and Harvey are infamous for the tremendous amount of flood damage. Although the hurricanes were the cause of the flooding, the peril of flood itself is not covered by a homeowner policy. Flood insurance is available through the National Flood Insurance Program (NFIP) and is its own, standalone policy.
But flooding is not the only type of water damage. Wind-driven rain may also be specifically excluded from your policy. Wind-driven rain is water intrusion through seams, gaps, or holes in the home. For example, water may seep under tiles on the roof and cause water damage inside. If the insurance company determines the tiles weren’t damaged due to the hurricane, but rather poor maintenance, this type of water damage claim could very well be declined.
Like all weather, hurricanes are unpredictable. The Southeast has experienced decade-long periods of calm seas bookended by furious storm seasons.
When there is an approaching hurricane, obtaining wind coverage via a homeowners policy or flood insurance through the NFIP may be restricted. For most of the Gulf and East Coasts, insurance companies will suspend the binding of policies whenever a tropical system enters “the box.”
In general, the box is a 16,000 square mile area extending over Florida, adjacent states, and well into the Atlantic Ocean. However, each insurance company may impose their own binding rules which may be more liberal or restrictive than the widely accepted hurricane box.
In addition to ensuring your homeowners insurance is in place, speak to your insurance agent about flood insurance. The NFIP has developed flood zones to help assist in determining the likelihood of flooding in a particular area. Don’t be fooled; everyone is in a flood zone. And when placing a new flood insurance policy, a 30-day wait will apply except in very specific circumstances.
For a complete review of your coverage, or to learn more about homeowners and flood insurance, contact the experts at demontinsurance.com or at (850) 942-7760. Our licensed insurance experts will be happy to answer any questions you have.