One of the many repercussions of the 2005 hurricane season was that insurance companies started adding hurricane and wind deductibles to homeowners insurance policies. The deductibles are not as simple as a renters insurance deductible, say, where the policyholder is responsible for the first $1,000 of damage and the insurer covers the rest -- up to the coverage limit, of course.
No, the deductibles are calculated as a percent of the home's value. With some companies charging as much as 5 percent, then, a Florida homeowner with a house valued at $500,000 would pay about $25,000 before the insurance policy would kick in. The way the policies are written, though, the deductible may not apply if the storm is not strictly a hurricane.
For homeowners in the Northeast, that classification could be the silver lining to Superstorm Sandy. The National Hurricane Center downgraded Hurricane Sandy to a "post-tropical storm" before she hit the East Coast. She wasn't a hurricane, so the companies cannot enforce the hurricane deductibles.
That may be the only good news for homeowners with wind and water damage from the storm, though. Insurance companies often differentiate between wind and storm damage. It is possible that a policy could exclude coverage for damage from wind because Sandy was not a hurricane.
And, of course, there is no guarantee that the insurance industry will not argue the "post-tropical storm" classification with state insurance regulators. Sustained winds of up to 74 mph are one indicator that a storm is a "hurricane," and Sandy reportedly hit the coast with winds of 80 mph.
Source: Insurance Journal, "Controversy Over Hurricane Deductibles May Just Be Beginning," Beth Pinsker Gladstone, Nov. 2, 2012
Our firm helps homeowners with insurance coverage disputes like the ones some homeowners hit by Sandy may be facing. If you would like to learn more about our practice, please visit the Miami, Florida, insurance coverage disputes page of our website.