I’d like to thank Tracie Sihle of Sihle Insurance Group for this information about hurricane deductibles. Many homeowners across South Florida will be making claims post-Irma.
Most homeowners policies have an “all other peril” (AOP) deductible for losses caused by perils such as vandalism, fire, lightening, and theft and a separate deductible for hurricane losses.
The hurricane deductible is mandated by Florida statutes.
The hurricane deductible is expressed as a percentage, typically 2-5%, but higher percentages are available. It is a percentage of the coverage amount, not a percentage of the loss.
For an example, a structure insured for $200,000 with a two percent deductible would have a deductible of $4,000 for damage caused by a hurricane.
The hurricane deductible applies only for a hurricane as defined in the statutes. According to Florida Statute 627.4025, a hurricane means a storm system that has been declared a “hurricane” by the National Hurricane Center or the National Weather Service. Note that a named tropical storm does not trigger the hurricane deductible.
According to the statutes, the duration of a hurricane in which the hurricane deductible would apply includes the time period:
- Beginning at the time a hurricane watch or warning is issued for any part of Florida by the National Hurricane Center.
- Continuing for the time period during which the hurricane conditions exist anywhere in Florida; and
- Ending 72 hours following the termination of the last hurricane watch or hurricane warning issued
The deductible applies on a calendar year basis. Using the earlier example of the $4,000 hurricane deductible, that $4,000 applies for all losses during the calendar year for losses due to hurricanes. For example, in 2004 some areas of Florida were hit by three major hurricanes in about 40 days. This calendar year deductible applies only if the customer was insured by the same company during all hurricanes. Assume that a hurricane causes $40,000 in damage; the claim is paid less the $4,000 deductible. If there is a second hurricane during the calendar year, the $4,000 hurricane deductible does not apply; instead the AOP (all other perils) deductible applies.
In a different example, suppose that the first hurricane causes damage of only $3,000. Due to the $4,000 deductible, nothing is paid by the carrier and you pay $3,000 of the deductible. If a second hurricane were to cause $35,000 in damage the claim is paid less a $1,000 deductible ($4,000 hurricane deductible less the $3,000 that applied for the first hurricane, leaving $1,000 deductible). If a third hurricane were to cause damage in the same calendar year, the AOP deductible would apply.
Many, if not most, insurance policies require that the customer report all hurricane losses, even those that are clearly below the deductible.
Policies are different; it’s key to read the specific policy in question to see how deductibles are structured.
For example, non-admitted insurance carriers will not comply the same as admitted carriers with some of the state’s regulations regarding hurricane deductibles.
Hurricane deductibles on policies typically can only be changed at the renewal date of the policy.
For questions and more information, please contact Traci Sihle:
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