Hurricanes, Storms, and Wind Oh My – Understanding the Difference
With an overactive hurricane season, 2017 brought devastation across the Gulf Coast and north along the Atlantic seaboard. The year saw a total of seventeen tropical storms, of which ten became hurricanes.
Ending a 12-year span, where not one hurricane made landfall in the United States, hurricanes Harvey and Irma broke the streak and caused billions of dollars in property damage. They also left policyholders wondering how their deductibles would apply after the wind died down.
The difference between a tropical storm and a hurricane is only a few miles per hour in wind speed. In the insurance world, however, it could mean the difference between paying a palatable few thousand-dollar deductible, or one which could reach into the tens of thousands of dollars and higher.
Understanding the difference between your deductible options with your insurance agent is the first step in avoiding any surprises the next time the wind blows.
Wind and Hail Deductibles
The broadest deductibles related to wind are those defined as Wind/Hail Deductibles. Under a Wind/Hail Deductible, damage caused by any wind, including hurricanes, tornados, or even just a strong afternoon thunderstorm, will trigger the deductible amount stated on your insurance policy’s declarations page.
In addition to wind, damaging events resulting from hail will also require you to meet the Wind/Hail Deductible. These deductibles apply on a “per occurrence” basis, meaning you will be required to pay the deductible amount each time a separate event occurs during the policy term.
Your wind/hail deductible may be the same or higher than your regular, all other peril deductible, which encompasses other causes of loss such as fire. The deductible may be a fixed dollar amount or a percentage of the insured value at risk. Deductibles, and the premium for each option, will be dependent on your property’s location relative to the likelihood of a wind event there.
Named Storm Deductibles
Next up are Named Storm Deductibles. These deductibles are used in geographic locations where tropical storms may form. Areas include all states along the Gulf Coast and many facing the Atlantic Ocean.
When an insurance policy utilizes a Named Storm Deductible, damage caused a tropical storm or hurricane will trigger it. In most instances, the deductible will be a percentage of the insured value and range from 1 percent to 5 percent. If damage occurs as a result of wind, not from a named storm, the standard “all other peril” deductible will apply.
Lastly, we have the Hurricane Deductible. Policies using a Hurricane Deductible will only trigger this higher insured retention if the storm which causes damage is, or was, at hurricane strength within 72 hours of making landfall.
For property owners in areas prone to tropical systems, besides having a fixed, flat deductible for all perils including hurricane, the Hurricane Deductible is the next best option. Land falling hurricanes are much rarer than tropical storms. Of the seventeen named storms formed in the Atlantic Basin during 2017, only two made landfall as a hurricane upon the mainland United States.
Additional Coverage Considerations
If your budget allows and if you are in a location where tropical storms are a threat, choosing a policy with a hurricane deductible may likely be your best choice. But the decisions don’t end there as there are two additional coverage definitions which can make a significant impact on your deductible outlay.
During the mid-2000s, Florida and the Gulf Coast States were hammered by one storm after another. For properties which were damaged by more than one storm, the owner was faced with paying multiple named storm or hurricane deductibles. Many insurers, in a bid to become more competitive, began limiting the application of the deductible on a per calendar year basis. This new option, the Calendar Year Named Storm (or, Hurricane) Deductible insulates insureds from paying these high deductible more than once in any single hurricane season.
While calendar year deductibles restrict how many deductibles may be paid in any given year, if you insured multiple buildings, specific policy language can make a difference in the amount of deductible you will be responsible, and may leave no coverage at all.
Insurance policies specify if deductibles apply on a per-location or per building basis. For example, if you are a business owner who owns two buildings at the same address, a per-location deductible will require a deductible payment equal to the sum of the values insured. The total includes each building’s individual value, its contents, and any amount of business income coverage included. Whereas, if your deductible is per-building, the final deductible payment will be determined separately per structure.
Know Your Risk
From tornados to category 5 hurricanes, understanding your property’s exposure to wind events is the first step in obtaining the proper insurance policy.
To learn more about your possible exposure and the deductible options available to you, contact our office at (850) 942-7760 to speak with a licensed agent.
Demont Insurance Agency, Inc. The Insurance You Need, The Assurance You Deserve.