What to Know about Deductibles as we enter the Atlantic Hurricane Season

Hurricane deductibles are not new. The first hurricane deductibles were introduced into policies over 20 years ago. In order to be able to continue getting reinsurance (basically insurance for insurers), and thus continue to offer homeowners insurance in high-risk areas it became necessary to require policyholders to share some of the cost by including hurricane deductibles in policies. Hurricane deductibles have helped to make more private insurance coverage available in coastal communities at a lower price.

Deductibles Differ by Company and by State
Nineteen states currently have some form of hurricane deductible in place. When shopping for insurance, always compare all deductibles as they may vary by company. Mandatory deductibles may be used in zip codes specified by New Jersey law and in other areas if they have been approved by the Department of Banking and Insurance. Here are deductible options that NJ companies use.

Windstorm Deductible: These usually apply to any kind of damage from a wind or hail event. It may be a flat amount- $1,000- or a percentage amount, usually 1%-5% of the building limit.

Named Storm Deductible: Generally refers to a storm system that has been declared and named by the National Weather Service. Any loss must have been caused or resulted from the named storm event. This deductible may be flat or a percentage of your building limit.

Hurricane Deductible: Generally applies when damage occurs solely from a hurricane as categorized by the National Weather Service or U.S. National Hurricane Center. This deductible may be flat or a percentage of your building limit.

It’s important to know that whether a hurricane, named storm or windstorm deductible applies to a claim depends on the applicable “trigger” selected by the insurance company and defined in your policy documents. While there are similarities among the state laws, no two laws are identical; triggers vary from state to state, as well as from insurer to insurer. The deductibles that apply to your policy can usually be found on the front page of your policy (policy declarations).

We want you to know and understand your insurance coverage. If you have any questions on your coverage and deductibles, please ask us.