Hurricane, Windstorm and Named Storm Deductibles

For Questions About Storm Deductibles: the Answers Aren't Just Blowing in the Wind

Hurricane, windstorm and named storm deductibles can sting every bit as much as the direct impact of a storm. Being that New Jersey is one of the relatively few states that offer even this level of coverage, however, the ability to insure property against the worst wild-card weather remains essential for Garden State residents. 

To live anywhere in New Jersey is to enjoy convenient access to highly rated beaches and boardwalks — as well as the kinds of coastal recreation and entertainment options that are far more than a simple day trip away for many of our fellow Americans.

Regardless of whether your home in the Garden State is close to a body of water, you live near what has become one of the frontiers of climate change; a densely developed metro-region landscape that has seen increasingly more frequent visits from aggressive new breeds of weather events once known as 20-year, 50-year, even hundred-year "storms of the century" like 2012's Superstorm Sandy. During a time in which even tornadoes are no longer an uncommon occurrence in the northeast, we have all become that much more conscious of the many ways in which the confluence of wind and water can impact our homes.

Of course, there have always been legendary storms that have done their part to reshape the geography and the economy of the region's coastline — as when The Great Atlantic Hurricane of 1944 devastated the Jersey Shore, making its wartime attack largely by surprise, at a time before the officially sanctioned phenomenon of the Named Storm. Even when a headline-making event makes its move anonymously (as in the December 1992 nor'easter), rapidly developing storm systems can nevertheless pack a wallop, even as our most sophisticated tracking systems make their appearance anything but a surprise.

What is still a surprise to many is the fact that a standard homeowners insurance policy offers little in the way of outright protections against the onslaught of hurricanes and major wind-driven events…this despite the fact that deductibles for hurricane and windstorm damage are mandated for homeowner policies in many Jersey Shore communities. As development in NJ's coastal counties has continued unabated through the decades, nearly half a million homes are considered to be at a high risk of vulnerability to hurricanes and severe windstorms — homes that would cost more than $150 billion to rebuild in the event they were destroyed by wind or storm surge.

Rather than the sort of dollar-value based figure that applies to most coverage on a standard homeowner policy, a hurricane, windstorm or named storm deductible is calculated as a percentage, generally no more than 5 percent in most cases, of a home's insured value. That seemingly modest figure, however, can take a big bite when 5 percent of an insured value of a half million dollars can represent a commitment by the homeowner to pay the first $25,000 in storm related damage costs out of pocket.    

Luckily, your Trusted Choice independent insurance agent can help you navigate the often aggressive currents of storm coverage.

What's In a Name? An Important Distinction for NJ Homeowners

Given that named storms segue from classification to classification as they travel their path to potential landfall — going from tropical depression, to tropical storm, to ever more destructive categories of hurricane — it makes sense to insure your coastal region home against damage from those named storms. 

According to Frank Jones, a partner with Mints Insurance in Millville, "hurricane or windstorm deductibles go into effect according to "trigger events" as defined by the insurer. Insurance companies determine the level of the hurricane or windstorm or wind/hail deductible…timing factors into trigger events, as in cases of damage occurring within 24 hours before a storm is named, or 72 hours after a hurricane is downgraded to lesser storm, or a hurricane watch is cancelled. It’s best to check your policy to find the details, or contact a Trusted Choice agent to help you sort it all out.”

Pulling the Trigger on Deductibles in High-Risk Areas

Hurricane, named storm and windstorm deductibles that are expressed as a specified percentage of a home's insured value — rather than as a given dollar amount — is a relatively recent change to the old model, brought about as a reaction to the insurance industry's  record losses (in the tens of billions) that followed in the wake of some epic hurricanes.

Even before Sandy delivered an unprecedented $18.8 billion blow to the entire coastal NY/NJ metropolitan region, the record $41 billion in claims from Katrina served to force the industry to adopt a completely new standard in calculating deductibles for hurricane and windstorm coverage — one that resulted in higher out of pocket costs for homeowners, even as it addressed the harsh new realities of a changing way of life on the front lines of climate change. Insurance against damage from these events is different from flood insurance, which is covered by the National Flood Insurance Program — a resource which also found itself stretched beyond any previously exercised limit post-Sandy.

Currently, New Jersey — where private insurance losses from Sandy totaled over $6 billion, second only to New York — is one of 20 states and districts to feature hurricane/ windstorm deductibles as a component of a homeowners policy. If you're a newcomer to owning a home in the Garden State, it's worth taking a close look at your insurance policy to see what kind of deductibles will apply in the event of a hurricane or major windstorm event. As Frank Jones maintains, it's also worth consulting an independent insurance agent to confirm the rules regarding storm deductibles in your community — and to discuss any available options for mitigating the costs of repairs to a storm-damaged home.

As Jones explains,"if you live in what is considered a high risk area, your deductible will be mandatory, percentage-based, and determined by home's insured value plus “a trigger" specified by insurer.”

In calculating your deductible, bear in mind that the higher of two deductibles is always the one that applies — so if you're living in one of those designated ZIP codes in which a 3 percent hurricane deductible is mandated, that percentage is based on your Coverage A (dwelling) limit or your Coverage B (Other Structures) limit, whichever is greater. In the event of a loss caused by a hurricane, the hurricane deductible goes into effect if the amount of the loss is greater than the standard "all-peril" deductible of the basic homeowners policy. 

Owners of one- to four-family homes who have been unable to obtain insurance through the regular marketplace can look into the FAIR Plans offered through the New Jersey Insurance Underwriting Association, a limited plan of coverage that includes a special hurricane deductible in specially designated costal areas. Created by the NJ State Legislature in the late 1960s, NJIUA underwrites over 10,000 residential and commercial policies per year. 

Your Trusted Choice For Facts on Loss Reduction, Endorsements, and Other "Riders on the Storm"

As Frank Jones observes, “Getting hurricane or windstorm insurance after you've incurred damage from a named storm can be extremely difficult. It’s best to be prepared. Even if you get government assistance in the event your community is declared a disaster area, help may not arrive for years, as many of those impacted most by Sandy found out.”

Depending upon the insurer, the opportunity to actually eliminate the hurricane deductible is available to some policyholders (excepting those whose homes sit within any of the specially designated ZIP codes), provided the owner enacts a series of precautions and preventive measures prior to a loss. 

Hurricane Precautions and Preventative Measures Include:

All of this work must be certified and signed off on by a licensed architect, licensed engineer or municipal building inspector. It also represents a considerable outlay by the homeowner — but one that Jones explains would greatly increase the chances of a coastal residence being able to ride out an epic storm, while saving major expense in the long run, versus simply reacting to a catastrophe after the fact. You may also want to talk to your insurance agent about purchasing endorsements, options or riders to an existing policy that can raise the coverage limit for some categories of property items considered particularly vulnerable to major storm damage.  

To determine the coverage that's right for you, consult your Trusted Choice independent insurance agent to discuss all your options when it comes to hurricanes, wind, hail, and the worst wild-card weather in nature's playbook — and let us help you navigate the many questions that swirl around the topic of hurricane deductibles, in a way that won't make you lose the roof over your head.