Hurricane and Windstorm Deductibles

Hurricane and Windstorm Deductibles

NOVEMBER 2014

UP FRONT

  • Hurricanes and tropical storms caused $158.2 billion in insured losses in 2012 dollars in the United States from 1993 to 2012, according to ISO.

  • To limit their exposure to these losses, insurers in coastal states along the Atlantic seaboard and the Gulf of Mexico sell homeowners insurance policies with percentage deductibles for hurricane damage instead of the traditional dollar deductibles. These deductibles are separate from deductibles for other perils such as fire.

  • Nineteen states and the District of Columbia have hurricane deductibles.

 

THE TOPIC

After Hurricane Andrew in 1992, insurers realized that losses from hurricanes could be much higher than they had previously thought. Hurricane Katrina, in 2005, which cost insurers more than $41 billion at the time, confirmed their fears. After these extraordinary losses, reinsurance companies, insurers that share the cost of claims with primary companies, such as homeowners insurers, said that they could not assume so much risk and that primary companies must reduce their potential losses.

During the Atlantic hurricane season, which lasts from June to November, every coastal state from Florida to Maine could potentially be hit by a storm. Increasing development along the coastal areas of these states has put more and more homes at risk of severe windstorm damage. To limit their exposure to catastrophic losses from natural disasters, insurers in these states sell homeowners insurance policies with percentage deductibles for storm damage instead of the traditional dollar deductibles, which are used for other types of losses such as fire damage and theft. With a policy that has a $500 standard deductible, for example, the policyholder must pay the first $500 of the claim out of pocket. But percentage deductibles are based on the home's insured value. So if a house is insured for $300,000 and has a 5 percent deductible, the first $15,000 of a claim must be paid out of the policyholder’s pocket. The details of hurricane deductibles are spelled out on the declarations page of homeowners policies.

To some degree, depending on the state, insurance companies determine the level of the hurricane or windstorm or wind/hail deductible and where it should apply, except in Florida where state law dictates these variables. Insurers' hurricane deductible plans must be reviewed by the individual state insurance department where they may be subject to various regulations and laws.

There are two kinds of wind damage deductibles: hurricane deductibles, which apply to damage solely from hurricanes, and windstorm or wind/hail deductibles, which apply to any kind of wind damage. Percentage deductibles typically vary from 1 percent of a home's insured value to 5 percent. In some coastal areas with high wind risk, hurricane deductibles may be higher. The amount that the homeowner will pay depends on the home's insured value and the "trigger" selected by the insurance company, which determines under what circumstances the deductible applies. In some states, policyholders may have the option of paying a higher premium in return for a traditional dollar deductible, depending on how close to the shore they live. In some high-risk coastal areas, insurers may not give policyholders this option, making the percentage deductible mandatory.

Nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington DC. Listed below are reports for these states detailing hurricane deductibles.

Explanation of Terms:

  • Beach Plan, FAIR (Fair Access to Insurance Requirements) Plan; and other involuntary or residual markets: insurers of last resort, state-run pools that provide insurance to people who are unable to obtain insurance in the voluntary market. Beach Plans operate in specific coastal territories, defined by zip codes, counties or geography; FAIR Plans are generally statewide.
  • Deductible: amount of loss paid by the policyholder before insurance kicks in.
  • Dollar deductibles: a flat dollar amount.
  • Mandatory deductibles: may be set by insurance rules, regulations or state law, or by an insurer.
  • Market Assistance Plan (MAP): a voluntary clearinghouse and referral system designed to put people looking for insurance in touch with insurance companies that have agreed to take on more business.
  • Optional deductibles: mostly used in less vulnerable areas. Policyholders may opt for these higher deductibles in order to pay a lower premium.
  • Percentage deductibles: calculated as a specified percentage, for example 2 percent, of the insured value of the property.
  • Standard deductibles: an indication of the usual homeowners insurance deductibles in the state or area.
  • Trigger: an event that is needed for a hurricane deductible to be applied. Hurricane deductibles are “triggered” only when there is a hurricane, or a tropical storm. Triggers vary by state and insurer and may apply when the National Weather Service (NWS) "names" a tropical storm, declares a hurricane watch or warning or defines the hurricane's intensity. Triggers generally include a timing factor, i.e., damage occurring within 24 hours before the storm is named or a hurricane makes landfall up to as long as 72 hours after the hurricane is downgraded to a lesser storm or a hurricane watch cancelled.
  • WindMap (NJ): a market assistance plan set up at the New Jersey Department of Insurance that is subject to state rules concerning eligibility but operates in the voluntary market instead of being a state-run plan.

ALABAMA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service declares a hurricane and remain in effect for a specified amount of time after the storm has passed. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit. State law mandates insurers offer discounts for policyholders who strengthen their homes against wind damage.

Alabama law requires insurers to provide premium discounts or rate reductions to policyholders who build, rebuild or retrofit certain residential properties in accordance with specified standards to resist hurricanes and other catastrophic windstorm events.  Homes that meet standards from the Institute for Business and Home Safety (IBHS) and other codes are eligible for discounts. See Department of Insurance website for details.

Alabama Insurance Underwriting Association (Beach Plan): The Alabama Insurance Underwriting Association (AIUA, http://www.alabamabeachpool.org) provides two types of policies: fire and extended coverage (not as comprehensive as standard homeowners policies and provides no liability coverage); and a wind and hail only policy for homes, condominiums, mobile homes and commercial businesses located in the Beach, Seacoast and Gulf Front territories of Baldwin and Mobile Counties. The Beach Plan provides residential coverage on the building and contents up to a $500,000 limit. The plan offers discounts on policies covering residential dwellings built to, or retrofitted to fortified wind resistive standards, as certified by the IBHS. The hurricane deductible is generally 5 percent. See web site for details.

As a result of issues that arose in the wake of Hurricane Ivan the Hurricane Insurance Issues Task Force was formed. The Task Force created a Market Assistance Plan which is a cooperative venture led by the Baldwin Association of Realtors, the Baldwin Homebuilders Association, the Mobile Area Association of Realtors, the Mobile Homebuilders Association, and the Alabama Independent Insurance Agents. The plan was created  to help those who reside or own businesses in Baldwin and Mobile counties find property insurance by making a “referral list” comprised of companies writing in the area and agents that serve in the area. Inclusion in the list is strictly voluntary. The Department makes no endorsement of any company or agent that participates in the program.

Information Sources:

CONNECTICUT HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, is by law when the National Weather Service (NWS) declares a hurricane that records winds of 74 miles per hour or more anywhere in Connecticut. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. The hurricane deductible is in effect until 24 hours following termination of the last hurricane warning issued for any part of Connecticut by the NWS; or 24 hours after the hurricane is downgraded from a hurricane by the NWS for any part of Connecticut.

If the policy has a mandatory hurricane deductible, this means the insurer will not sell homeowners coverage without a hurricane deductible. Effective October 1, 2014, the insurance department will allow companies to apply an actuarially justified hurricane deductible not to exceed 5 percent on new business written on properties within 2,600 feet from the coast and not to exceed 2 percent if the property is located over 2,600 feet from the coast. For renewal business the same rules generally apply unless the insured has installed storm shutters or has them on the premises as a means of mitigating loss from hurricanes or other severe storms. The new law prohibits insurers from declining to write or renew a homeowners insurance policy solely because the homeowner has not installed storm shutters. The insurance department has guidelines for shutter mitigation requirements and details of the new law on its on its website.

Connecticut FAIR Plan: The Connecticut FAIR Plan (http://www.ctfairplan.com/ ) insures homeowners who have not been able to find coverage elsewhere. Provides actual cash value coverage for a very basic “named perils” policy. Dwellings located within 2,600 feet of the shoreline will have two deductibles—one deductible for named perils and a separate hurricane deductible of 5 percent. See web site for details.

CMAP: The Coastal Market Assistance Program (C-MAP) assists homeowners living in Connecticut coastal areas who have been unable to obtain insurance. C-MAP was created by the insurance companies that write homeowners insurance in Connecticut under the authorization of the Connecticut Insurance Department and is administered by the Connecticut FAIR Plan.

Information Sources:

DELAWARE HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

Insurers are required to provide clear and prominent notice concerning all hurricane and wind/hail deductibles and must include information on the trigger, how the deductible is applied and if it is stated as a percentage or dollar amount. In the case of percentage deductibles, the policy must provide an example of how it works.

Insurance Placement Facility of Delaware: The facility (http://www.defairplan.com ) insures homeowners who have not been able to find coverage elsewhere for windstorm and hail damage. The FAIR Plan uses a $2,000 hurricane deductible that is mandatory in five zip codes along the coast and optional in 11 zip codes.  The deductible is triggered when the National Hurricane Center of the National Weather Service declares a hurricane watch or warning for any part of the state and ends 72 hours after the National Weather Service terminates the last hurricane watch or warning for any part of the state. See web site for details.

Information Sources:

DISTRICT OF COLUMBIA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible.  When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

The FAIR Plan ((http://www.dcpif.org ) insures homeowners who have not been able to find coverage elsewhere. See web site for details.

Information Sources:

FLORIDA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling or as a flat dollar amount like a standard deductible. By Florida statute, the application of hurricane deductibles is triggered by windstorm losses resulting only from a hurricane declared by National Weather Service. Hurricane deductibles apply for damage that occurs from the time a hurricane watch or warning is issued for any part of Florida, up to 72 hours after such a watch or warning ends and anytime hurricane conditions exist throughout the state.

Hurricane deductibles and their triggers are set by law and are the same for the private, or regular market, as well as Florida’s Citizens Property Insurance Corporation (CPIC), the state-run program which provides property insurance to consumers. The hurricane deductible applies only once during a hurricane season. All insurers must offer a hurricane deductible of $500, 2 percent, 5 percent and 10 percent of the policy dwelling or structure limits. The percentages are based on the total value of the home (e.g., a 10 percent hurricane deductible on a $200,000 home would be $20,000). In some cases a deductible of more than 10 percent is permissible. For example, for homes that are insured for less than $500,000, the deductible can be higher than 10 percent if the homeowner states the dollar value of the deductible in a letter to the insurer. The deductible must be stated in the policy as a dollar amount regardless of the percentage.

By Florida law, property insurance rate filings must include mitigation discounts or credits.  These are applied to property insurance premiums. These discounts are available for personal and commercial residential property only.

The CPIC (https://www.citizensfla.com), Florida's state-run insurer of last resort will insure new homeowners in high risk areas and others who cannot find coverage in the open private market. CPIC offers three types of property and casualty insurance:

  • Personal Lines Account, for homeowners, mobile homeowners, tenants and condominium owners;
  • Commercial Lines Account, for condominium associations, apartment buildings and homeowners associations, and the
  • High-Risk Account, for personal, commercial residential and commercial non-residential customers.

See web site for details.

Florida Market Assistance Program (FMAP, http://www.fmap.org ): The FMAP is a free referral service designed to match consumers who cannot find property insurance with Florida licensed agents and insurers who are writing new business. See web site for details.

Information Sources:

GEORGIA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible.  When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

Georgia Insurance Underwriting Association (FAIR Plan): The FAIR Plan (http://www.georgiaunderwriting.com ) insures those who have not been able to find coverage elsewhere for windstorm and hail damage only for homes and businesses on the offshore islands and in Bryan, Camden, Chatham, Glynn, Liberty and McIntosh counties, and wind and hail and other perils in the remainder of the state. See web site for details.

Information Sources:

HAWAII HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has a mandatory deductible, this means the insurer will not sell homeowners coverage without a hurricane deductible.  When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

The Hawaii State Legislature created the Hawaii Hurricane Relief Fund in 1993 to provide compensation for windstorm damage from hurricane force winds in the wake of Hurricane Iniki which caused about $1.6 billion in insured losses when it occurred. After the homeowners insurance market stabilized, the fund was shut down and stopped writing coverage at the end of 2000. Most homeowners insurers provide property coverage for all perils and liability but exclude hurricane insurance.  Homeowners must purchase hurricane insurance separately from specialized companies.

Information Sources:

LOUISIANA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after a storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

There are three deductibles for homeowners policies related to wind damage: hurricane, named storm and windstorm and hail.  Named storm deductibles are activated when the National Hurricane Center reports that a storm reached tropical storm strength when winds reach 39 miles per hour (mph).  Hurricane deductibles are activated when the National Hurricane Center reports that a tropical storm reached hurricane strength, at 74 mph.  Windstorm and hail deductibles are used when homes sustain damage from winds from any source: hurricanes and tropical storms, tornadoes, or other storms.

Insurers generally cannot increase the named storm or hurricane deductible on homeowners insurance policies that have been in effect for more than three years. Insurers cannot impose more than one named storm or hurricane deductible per hurricane season.

State regulations mandate that homeowners may be eligible for premium discounts if they build or retrofit their home to comply with the state’s construction code or install mitigation or retrofitting improvements that are known to reduce loss from a windstorm or hurricane.

Most homeowners coverage in coastal areas is underwritten by the Louisiana Citizens Property Insurance Corporation.

Louisiana Citizens Property Insurance Corporation (http://www.lacitizens.com ): Provides insurance for residential and commercial property for those who cannot obtain it in the voluntary market. The Louisiana Citizens FAIR Plan and the Louisiana Citizens Coastal Plan operate as programs of the Louisiana Citizens Property Insurance Corporation. The Coastal Plan offers coverage in Zone 5, south of the Intercoastal Waterway, the most hurricane-vulnerable area. The Fair Plan offers coverage in the rest of the state. Both offer wind and hail only policies. See web site for details.

Information Sources:

MAINE HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

Maine is one of the least vulnerable states for hurricane damage. However, some insurers in the state offer separate deductible options for windstorm, water and hail damage; others have adopted percentage deductibles, restricted coastal exposure or increased rates.

Information Source:

MARYLAND HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

Maryland law was amended after Hurricane Irene in 2011 to limit the hurricane deductibles to parts of the state for which the National Hurricane Center of the National Weather Service issued a hurricane warning. If a home is not located in the part of the state that was subject to a hurricane warning, a percentage deductible may not be imposed. In addition, the law limits the use of a percentage deductible to loss that takes place while the hurricane warning is in effect and until 24 hours following termination of the last hurricane warning. Maryland law requires that a hurricane or other windstorm deductible cannot exceed 5 percent of the coverage limit unless the commissioner has granted written approval to the insurance company. However, the homeowner may choose to purchase higher deductibles. The insurer must provide the policyholder with an annual statement that explains how the deductible is applied.

Insurers are required by law to offer a premium discount to homeowners who submit proof to their insurer that they have made qualified mitigation repairs or  improvements that materially mitigate loss from wind and have had these improvements inspected by a licensed contractor. The improvements are subject to inspection and verification by the insurer.

Maryland Joint Insurance Association: Insures homeowners and businesses who have not been able to find coverage elsewhere. Seasonal property and mobile homes are not eligible. Windstorm or hail deductibles of 5 percent apply to property within 200 feet of water on the Atlantic Ocean and Chesapeake Bay and its tributaries.  Windstorm or hail deductibles range from 1 percent to 10 percent of coverage, and from $1,000 to $10,000. See web site for details.

Information Sources:

MASSACHUSETTS HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other causes of loss. As a rule, they are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

According to the Massachusetts Division of Insurance, some insurers include mandatory wind deductibles that apply to any wind-related damage in specified coastal territories such as Bristol, Plymouth, Barnstable, Dukes and Nantucket Counties, or within a certain distance of the shore. The Division of Insurance requires that consumers be given clear disclosures of the deductibles before they purchase insurance. In addition the Division encourages insurance companies to allow policyholders to reduce or eliminate their wind deductible by strengthening their property against damage from wind. The maximum mandatory deductible is a flat $5,000, or 5 percent, of the coverage for the main structure of the property. See http://www.mass.gov/ocabr/consumer/insurance/home-insurance/report-on-homeowners-insurance/.

Massachusetts Property Insurance Underwriting Association (FAIR Plan, http://www.mpiua.com ): Insures properties where the homeowner or business has not been able to find coverage elsewhere. The plan uses a windstorm/hail deductible for any type of wind damage. The minimum windstorm/hail deductible can be reduced if the policyholder takes certain steps to strengthen the home from wind damage. Depending on location distance from the shore minimum windstorm deductibles are generally between 1 and 5 percent. See web site for details.

The Massachusetts Market Assistance Plan (http://www.mpiua.com ) is a voluntary network of participating homeowners insurance companies and insurance brokers to assist residents in obtaining homeowners insurance.

Information Sources:

MISSISSIPPI HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

In Mississippi, percentage storm deductibles can be named storm deductibles or hurricane deductibles. In  both cases, the deductible applies beginning when a named storm or hurricane watch or warning is issued anywhere in the state by the National Hurricane Center of the National Weather Service and ending 24 hours after the last named storm or hurricane watch or warning is issued for any part of the state. Beginning July 1, 2014, changes were adopted that among other provisions stipulate that insurers that use named storm or hurricane deductibles must clearly state on the homeowners policy the timing for the deductible and offer a practical example of how the deductible works. The actual dollar amount of the percentage deductible based on the policyholder’s coverage amount must be shown on the declarations page of the policy. Insurers must be in full compliance with the new provisions by October 1, 2014.

Mississippi Windstorm Underwriting Association (MWUA, Wind Pool): MWUA provides windstorm and hail coverage only in the coastal counties of George, Hancock, Harrison, Jackson, Pearl River and Stone. Coverage is available up to $1,000,000 for one- to four-family dwellings and $250,000 for contents. MWUA policies typically contain a hurricane deductible of 2 percent of the insured value of the home. The hurricane deductible is triggered by windstorm losses resulting from a named storm as declared by the National Hurricane Center of the National Weather Service and remains in effect until a tropical storm warning is over. MWUA offers discounts of up to 30 percent to policyholders who improve the hurricane resistance of their homes. See web site for details.

Mississippi Residential Property Insurance Underwriting Association (MRPIUA): Insures owners of one- and two-family dwellings in the state who have not been able to find coverage elsewhere for windstorm, hail and fire and extended coverage. Properties located in the three lower coastal counties of Mississippi (Hancock, Harrison and Jackson counties) cannot obtain wind and hail coverage through MRPIUA. This coverage is available at the Mississippi Windstorm Underwriting Association. Coverage limits under MRPIUA are up to $200,000 for buildings and $75,000 for contents. MRPIUA policies contain a standard deductible of $500 for all perils. See website for details.

Information Sources:

NEW JERSEY HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity.

In New Jersey, hurricane deductibles approved by the Department of Banking and Insurance apply to losses from a storm designated a hurricane by the National Weather Service (NWS) but only if sustained winds speeds of 74 mph have been measured somewhere in the state. According to the Department of Banking and Insurance, the duration of a hurricane includes the time period beginning 12 hours prior to the first time sustained hurricane force winds of 74 miles per hour or greater are measured in New Jersey by the NWS (regardless of whether the sustained hurricane force winds reach the risk insured under the policy) continuing for the time period during which hurricane conditions exist anywhere in New Jersey and ending 12 hours after the last time hurricane force winds of 74 miles per hour or greater are measured in the state by the NWS.

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. Insurers may file to use mandatory hurricane deductibles of up to 5 percent. Insurers must include a notice to policyholders detailing the hurricane deductible and, if the information is not on the notice, the notice must state that the information can be found on the policy’s declarations page.

If the insurer includes an optional hurricane deductible, the policyholder can choose it and receive premium credit. Insurers may file to use optional deductibles of up to 10 percent.

New Jersey Insurance Underwriting Association (FAIR Plan, http://www.njiua.org ):  Insures one- to four-family homes where the owner has not been able to find coverage elsewhere. Coverage is limited, but perils include wind. 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. Mandatory hurricane deductibles of up to 5 percent and optional deductibles of up to 10 percent may be used. Hurricane deductibles apply to losses from a storm designated a hurricane by the National Weather Service, with sustained winds speeds of 74 mph anywhere in the state, beginning 12 hours before the 74 mph winds begin and ending 12 hours after the last measurement of 74 mph winds is made. Homes that have certain wind-resistant features are eligible for a hurricane deductible reduction if they are properly documented. See state FAIR Plan website for details.

Information Sources:

NEW YORK HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. In New York state, the Department of Financial Services has approved hurricane windstorm deductibles for two scenarios: (1) a Category 1 or higher hurricane making landfall anywhere in the State of New York as determined by the National Weather Service, or (2) a hurricane making landfall outside the state but which is determined by the National Weather Service to have reached Category 1 or higher winds (74 miles per hour or higher) in the area (territory) within New York State in which the losses occur.

 

According to the Department, the mandatory deductibles which are shown on the policy’s declarations page range from 1 percent to 5 percent of the insured amount, with optional higher percentages also available. The event which triggers the deductible varies among insurers. Some use a category 1 as the trigger, while others use category 2. In any event, the hurricane would have to be designated by either the National Weather Service or the National Hurricane Center. Other insurers use either a specific mile-per-hour wind speed as a trigger or a mandatory deductible for all windstorm loss. Hurricane deductibles by company can be viewed on the New York State Department of Financial Services Website.

 

If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit. The deductible applies to the five boroughs of New York City (Manhattan, Bronx, Brooklyn, Queens and Staten Island), Nassau and Suffolk Counties and coastal areas of Westchester County). The Department of Financial Services requires insurers to express hurricane deductibles as a dollar amount on the declarations page of any policy to which it is attached.

Insurers are required by law to offer discounts to any homeowner who has installed hurricane/storm shutters or hurricane-resistant laminated glass windows and doors.

New York Property Insurance Underwriting Association (FAIR Plan, http://www.nypiua.com ): The plan insures residential and commercial properties in the state where the homeowner cannot find coverage elsewhere. "Extended coverage" includes windstorm coverage. In the five boroughs of New York City (Manhattan, Bronx, Brooklyn, Queens and Staten Island), Nassau, Suffolk and Westchester Counties policies have a 2 percent windstorm deductible that takes effect 12 hours before and after a Category 2 or higher hurricane as declared by the National Weather Service makes landfall anywhere in the state.  Properties closest to the shore must be inspected. See web site for details.

Coastal Market Assistance Plan (C-MAP, http://www.nypiua.com/cmap.html ): The C-MAP assists policyholders living on the south shore of Long Island, Brooklyn, Queens, Staten Island, and Long Island’s forks that are within 1 mile of the shore and property on the north shore of Long Island, in the Bronx and Westchester within 2,500 feet of the shore locate an insurer willing to provide homeowners coverage. See web site for details.

Information Sources:

NORTH CAROLINA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

Mitigation credits apply to qualifying homeowners in the state’s beach and coastal territories (18 coastal counties).The credits provide premium discounts for wind and hail coverage on homes with qualifying construction features that help mitigate damage and insurance losses.

North Carolina Joint Underwriting Association (FAIR Plan, http://www.ncjua-nciua.org ): Insures residential and commercial properties statewide where the homeowner has not been able to find property coverage elsewhere except in barrier islands adjacent to the Atlantic Ocean. See web site for details.

North Carolina Insurance Underwriting Association (Beach Plan, http://www.ncjua-nciua.org ): Insures properties where the homeowner has not been able to find coverage elsewhere for windstorm and hail damage only in 18 coastal counties. See web site for details.

Named storm deductibles in the FAIR and Beach Plans range between 1 and 5 percent.

Information Sources:

PENNSYLVANIA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other causes of loss. As a rule, they are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

According to the Department of Insurance, some homeowners insurance policies for properties located in the state have special hurricane, tropical storm or named storm deductibles based on a percentage of a property’s insured value. These deductibles typically range from 1 percent of a home’s insured value to 5 percent.

RHODE ISLAND HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. If the policy has mandatory deductibles, the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

Insurers in Rhode Island may apply a hurricane deductible on homeowners policies of no more than 5 percent of a home’s insured value. Windstorm deductibles may not be used. (Windstorm deductibles apply to damage from any kind of wind, not solely from hurricanes.) Insurers may offer a flat dollar deductible instead of or in addition to a percentage deductible but the total deductible may not exceed 5 percent of the insured value of the property. Premium credits, or discounts, must be provided if policies have hurricane deductibles. The deductible will only be in effect when the National Weather Service issues a hurricane warning for the applicable parts of Rhode Island and will remain in effect for 24 hours after the last warning. According to the Department of Insurance, for Block Island a loss is due to a hurricane when there are hurricane force sustained winds as defined by the National Weather Service. For the remainder of the state, a loss is due to a hurricane when there are hurricane force sustained winds anywhere in the state other than Block Island, as reported by the National Weather Service. If a policyholder experiences a loss from more than one hurricane in a calendar year, the insurer can apply the hurricane deductible only once. Insurers are required to post a notice containing all details pertaining to hurricane deductibles on the homeowners policy, including at least two practical examples of how they work.

Mitigation: Insurers can require mitigation measures only in certain specified zones and must waive the hurricane deductible if the policyholder implements approved mitigation measures. See Rhode Island Department of Insurance website.

Rhode Island Joint Reinsurance Association: Insures homeowners and commercial property owners who have not been able to find coverage in the voluntary market. Hurricane deductibles are mandatory and deductibles may not exceed 5 percent and will vary by territory and by the Rhode Island Building Code Wind Zone. The wind zones refer to the coastal areas and Block Island (see mandatory deductible requirements for homeowners and dwelling policies on the Rhode Island Joint Reinsurance Association website. Mitigation measures will eliminate or reduce the hurricane deductibles and will also provide for premium relief.

Information Sources:

SOUTH CAROLINA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit.

As of June 2014, insurers in South Carolina are required to notify residential property insurance policyholders if the policy contains a separate deductible for hurricane, wind or named storm damage. If it is included, the insurer must provide an example to show how the deductible functions for a policy valued at $100,000. The insurer must also include a clear explanation of the event that will trigger the deductible.

South Carolina Wind and Hail Underwriting Association (Wind Pool, http://www.scwind.com ): The association insures properties where the homeowner has not been able to find coverage elsewhere for windstorm and hail damage from any type of windstorm. The Wind Pool operates in certain coastal areas. Deductibles are 2 and 3 percent, depending on the Zone. Higher deductibles are available for premium credit. See web site for details.

Information Sources:

TEXAS HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5, with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit. Under Texas law, the deductible applies to windstorm and hail damage from any type of wind storm, not only named storms or hurricanes.

Texas Windstorm Insurance Association (TWIA, http://www.twia.org ): Provides adequate wind and hail coverage when it is not available in the insurance marketplace for 14 counties along the Texas Gulf coast and parts of Harris County (Galveston Bay). Residential policyholders can purchase TWIA coverage for dwellings up to $1.77 million on building and contents. For apartments, condos and townhouses, coverage is available only for contents up to $374,000. For mobile homes, coverage is available for building and contents up to $84,000. See web site for details.

Texas Fair Access to Insurance Requirements Plan Association (FAIR Plan, http://www.texasfairplan.org ): Provides residential property insurance to qualified homeowners who cannot obtain insurance from licensed insurance companies. The Fair plan operates statewide but cannot provide wind and hail coverage in areas that are eligible for inclusion in the TWIA (The TWIA covers only 14 coastal counties and five communities in Harris County [Galveston Bay].) See web site for details.

Helpinsure.com (http://www.helpinsure.com/): Administered by the Texas Department of Insurance, Helpinsure.com has several resources available to help coastal residents find wind and hail insurance coverage. It includes a Wind and Hail Insurance Resource Page with information about wind and hail coverage and companies that are providing the coverage in coastal areas (http://www.helpinsure.com/lcenter/residential.html).

Information Sources:

VIRGINIA HURRICANE DEDUCTIBLES

Hurricane deductibles are percentage or dollar deductibles that are higher than for other perils, or causes of loss. They are calculated as a percentage of the dollar amount of coverage on the dwelling. The trigger for hurricane deductibles, or the point at which they apply, varies by company. Triggers have some common characteristics: they generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for a specified amount of time after the storm has passed. The intensity of hurricanes may also affect the trigger. Hurricanes are classified on a scale of 1 to 5 with 5 as the highest intensity. If the policy has mandatory deductibles, this means the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may choose a higher deductible for a premium credit. In Virginia, insurers may use “named storm” deductibles, which go into effect when the National Weather Service names a storm at tropical storm strength (winds 39-73 mph).

Virginia Property Insurance Association (FAIR Plan, http://www.vpia.com ): The association provides dwelling and commercial property coverage to individuals and businesses throughout the state that are unable to obtain coverage through the voluntary insurance market. The VPIA uses named windstorm deductibles that go into effect when a National Weather Service-declared storm reaches Virginia anywhere in the state and end 72 hours after the termination of named storm watches and warnings anywhere in the state. Named storm windstorm deductibles are dollar deductibles. They are mandatory in the Beachfront or Seacoast territories and range from $1,000 to $5,000. See web site for details.

Information Sources:

 

THE SAFFIR-SIMPSON HURRICANE WIND SCALE

Category Sustained wind speed (mph) Wind damage  Historical example
1 74-95 Very dangerous winds will produce some damage Hurricane Dolly, 2008, South Padre Island, Texas
2 96-110 Extremely dangerous winds will cause extensive damage Hurricane Frances, 2004, Port St. Lucie, Florida
3 111-129 Devastating damage will occur Hurricane Ivan, 2004, Gulf Shores, Alabama
4 130-156 Catastrophic damage will occur Hurricane Charley, 2004, Punta Gorda, Florida
5 More than 157 Catastrophic damage will occur Hurricane Andrew, 1992, Cutler Ridge, Florida

Source: U.S. Department of Commerce, National Oceanic and Atmospheric Administration, National Hurricane Center.

View Archived Tables

 

 

HURRICANES AND RELATED DEATHS IN THE UNITED STATES, 1994-2013

Year Total
hurricanes
Made landfall
as hurricane
in the U.S.
Deaths (1)
1994 1 0 8
1995 3 3 29
1996 3 2 59
1997 1 1 6
1998 10 3 23
1999 8 2 60
2000 8 0 4
2001 9 0 42
2002 4 1 5
2003 7 2 24
2004 9 6 (2) 59
2005 15 7 1,518
2006 5 0 0
2007 6 1 1
2008 8 4 (3) 41
2009 3 1 (4) 6
2010 12 0 11
2011 7 1 44
2012 10 1 (5) 83
2013 2 0 1

(1) Includes fatalities from high winds of less than hurricane force from tropical storms.
(2) One hurricane (Alex) is considered a strike but not technically a landfall.
(3) Includes Hurricane Hanna, which made landfall as a tropical storm.
(4) Hurricane Ida, which made landfall as a tropical storm.
(5) Excludes Hurricane Sandy, which made landfall as a post-tropical storm.

Source: Insurance Information Institute from data supplied by the U.S. Department of Commerce, National Oceanic and Atmospheric Administration, National Hurricane Center.

View Archived Tables

 

 

CATASTROPHIC HURRICANE LOSSES IN THE UNITED STATES, 2004-2013

($ billions)

    Estimated insured loss     Estimated insured loss
Year Number of catastrophic
hurricanes (1)
Dollars when
occurred 
In 2013
dollars (2)
Year Number of catastrophic
hurricanes (1)
Dollars when
occurred 
In 2013
dollars (2)
2004 5 $22.9 $27.0 2009 0 (3) NA NA
2005 6  58.3 67.6 2010 0 (3) NA NA
2006 0 (3) NA NA 2011 1 $4.3 $4.4
2007 0 (3) NA NA 2012 2 19.7 20.0
2008 3 15.2 16.3 2013 0 (3) NA NA

(1) Hurricanes causing insured property losses of at least $25 million in 1997 dollars and affecting a significant number of policyholders and insurers. Excludes losses covered by the federally administered National Flood Insurance Program.
(2) Adjusted for inflation through 2013 by ISO using the GDP implicit price deflator.
(3) No hurricane met the PCS definition of a catastrophe.

NA=Not applicable.

Source: The Property Claim Services® (PCS®) unit of ISO®, a Verisk Analytics® company.

View Archived Tables

 

 

THE TEN MOST COSTLY HURRICANES IN THE UNITED STATES (1)

($ millions)

        Estimated insured loss (2)
Rank Date Location Hurricane Dollars when
occurred
In 2013
dollars (3)
1 Aug. 25-30, 2005 AL, FL, GA, LA, MS, TN Hurricane Katrina $41,100 $47,622
2 Aug. 24-26, 1992 FL, LA Hurricane Andrew 15,500 23,386
3 Oct. 28-31, 2012 CT, DC, DE, MA, MD, ME, NC, NH,
NJ, NY, OH, PA, RI, VA, VT, WV
Hurricane Sandy 18,750 19,033
4 Sep. 12-14, 2008 AR, IL, IN, KY, LA, MO, OH, PA, TX Hurricane Ike 12,500 13,426
5 Oct. 24, 2005 FL Hurricane Wilma 10,300 11,934
6 Aug. 13-14, 2004 FL, NC, SC Hurricane Charley 7,475 8,939
7 Sep. 15-21, 2004 AL, DE, FL, GA, LA, MD, MS, NC, NJ,
NY, OH, PA, TN, VA, WV
Hurricane Ivan 7,110 8,502
8 Sep. 17-22, 1989 GA, NC, PR, SC, U.S. Virgin Islands, VA Hurricane Hugo 4,195 6,937
9 Sep. 20-26, 2005 AL, AR, FL, LA, MS, TN, TX Hurricane Rita 5,627 6,520
10 Sep. 3-9, 2004 FL, GA, NC, NY, SC Hurricane Frances 4,595 5,495

(1) Includes hurricanes occurring through 2013.                    
(2) Property coverage only. Excludes flood damage covered by the federally administered National Flood Insurance Program.                    
(3) Adjusted for inflation through 2013 by ISO using the GDP implicit price deflator.                    
                    
Source: The Property Claim Services® (PCS®) unit of ISO®, a Verisk Analytics® company.

 

BACKGROUND

In 1992, Hurricane Andrew caused $15.5 billion insured losses, the most expensive storm ever for insurers, with claims costing nearly four times as much as the previous most costly storm, Hurricane Hugo in 1989. It soon became apparent through computer-based models of storms and residential development patterns that homeowners insurers were far more vulnerable to huge weather-related losses than they had thought. Some of the largest homeowners insurers found it difficult to arrange for the reinsurance (insurance for insurance companies) coverage they needed to protect their bottom line because reinsurers were unwilling to assume so much risk. To get coverage from reinsurers, they had to agree to greatly reduce their potential maximum losses from severe wind and hailstorms by requiring their policyholders to bear a greater share of the cost. This was accomplished by switching over to percentage deductibles that not only increase the deductible amount across the board but force homeowners with expensive homes to take a higher financial burden than those with homes of lesser value.

The National Weather Service classifies tropical storms as low pressure systems forming over tropical areas, with winds of a minimum of 40 mph. Hurricanes are classified by using the Saffir/Simpson intensity scale which measures atmospheric pressure in terms of millibars (mb) or inches of mercury, along with wind speeds. 

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