Sticker shock is the last thing you want if you ever have to pick up the pieces after a hurricane. To ensure you’re financially prepared if a hurricane strikes, it's important to know if you have a hurricane deductible, especially if you live in coastal Virginia.
Virginia Beach -Hurricane Isabel 2003- Photo: vims.edu
Since 2005, the increasing cost of Atlantic Basin hurricanes has prompted insurance companies in 19 states, including Virginia, to include hurricane deductibles, also known as "named storm deductibles." It was the extraordinary losses of Hurricane Andrew in 1992, followed by a $41 billion in damages from Hurricane Katrina. This confirmed the need for homeowners living in high-risk areas to assume some of that risk with these big storms to keep home insurance affordable for everyone. The financial impacts, as well as the danger of these storms, have continued to climb.
If you have NNINS homeowners insurance, you may have a hurricane deductible listed on your homeowners policy.
If you have a named storm deductible, it would be listed on the declaration page of your homeowners policy and replaces the standard deductible on your policy when triggered. The named storm deductible is triggered when the National Weather Service (NWS) "names" a tropical storm or hurricane, issues a hurricane watch or warning for any part of Virginia. This does not apply for a winter named storm.
Once that happens, instead of the standard deductible on a related home claim, your responsibility would be the flat named storm deductible or a percentage deductible of the coverage A on your policy. The flat named storm deductible is like your standard deductible; it's set regardless of your home's value. If you don't have a "named storm deductible" listed on your policy, you have the standard deductible, or what we sometimes call a non-named storm deductible, for a home claim during a hurricane or other named storm.
This policy has a flat fee Named Storm Deductible.
If your property's location requires a percentage deductible, you will have a 1%, 2%, or 5% deductible of your home's value (coverage A). A lower percentage of deductible results in a higher annual premium. In comparison, a higher deductible lowers your yearly premium but will cost you more out-of-pocket in the event of a claim from a named storm.
For example, let's say your home's value is $300,000 (coverage A- Dwelling). In this case, your deductible on a weather-related claim for the named storm would be $3K for a 1% deductible with a higher premium. If you have a 2% deductible. you would pay $6K with a lower premium. Here's what your policy will look like:
This policy has a 2% Named Storm Deductible.
It’s also important to remember that hurricanes can cause significant flooding, which is not covered by standard homeowners or renters insurance policy. It’s good to know that there are no named storm deductibles for a renters insurance or car insurance policy. If you have a renters policy, your personal belongings are covered from hurricane or storm damage, except for flooding, and your landlord's insurance is responsible for the structure. If you have comprehensive coverage, your car is protected during a hurricane, even for flooding.
Understanding your deductibles is another reason it’s so important to build a relationship with your local independent agent. Coverages are often complex and the details matter. The right agent will walk you through everything so you can be sure you understand your policy and coverage. They'll also help you to be sure you are adequately covered for the risks in your Virginia locale. Use this time to make changes to your policy, like reviewing those deductibles. Keep in mind changes to any named storm deductible can't be made once a hurricane is imminent or after it hits.
Financial planning ahead of time for a hurricane or named storm should be factored into your family’s hurricane plan. For more information and assistance with financial preparation for a disaster or other emergency, visit FEMA's site.