Home & Property Insurance
A hurricane deductible is a tool the insurance companies are using to mitigate their total exposure to a single catastrophic event. They are on almost every homeowner policy in coastal areas in our region. They are commonly stated as a percentage of the insured value of the home and are in place of the standard deductibles for losses from fire and theft. Most policies have an all peril (including fire and theft but not windstorm) deductible ranging from $500 to $5,000, while many policies have up to a 5% hurricane deductible. That translates to a $25,000 hurricane deductible on a $500,000 home value.
There are two important components of the wind deductible on your policy. First is the actual dollar amount of the deductible, and that is spelled out on the declarations page of your policy. The second is the wind speed “trigger” for the deductible. Most commonly, a category 1 or a category 2 hurricane will trigger the special wind deductible on the policy.
Introduced in the early ’90s, the vast majority of homeowner policies written along the Atlantic seaboard have separate hurricane or wind deductibles. According to the Insurance Information Institute, 18 states and the District of Columbia have hurricane deductibles. This includes Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia.
It’s an important factor and a very important consideration. But in the vast majority of cases today, homeowners don’t have options from which to pick. Many companies are either not writing new home policies in coastal areas or only do so on a very, very restrictive basis. The insurance marketplace in coastal areas typically does not support changing homeowner companies based purely on deductibles in most instances.
We are not a big fan of the way New York has allowed individual companies to design individual hurricane deductibles. Each carrier has been able to file their own deductible (both the percentage and the trigger), which means each company has their own definition and deductible plan. While we are supportive of a free market system, a common deductible for all policies in New York would be in the public interest. As it stands now, there are different deductibles for each company, and some companies have more than one deductible plan, which makes for an insurance “Babel” of biblical proportions. Imagine being on the same street as another policyholder with the same company and having different deductible plans.
The starting point is to know and understand the hurricane deductible on your homeowner policy. If you have specific questions about the way a hurricane deductible works on your policy, please call us for a complete review.
In 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.
Damage from rising ground water and tidal water is typically excluded from standard homeowner policies.
Not necessarily. Federal disaster assistance typically comes in the form of a low-interest loan to help cover flood damage, not compensation for your losses. Even then, those loans are only available if the president formally declares a disaster and must be repaid along with any existing mortgage.
Under federal law, the purchase of flood insurance is mandatory for all federal or federally related financial assistance for the acquisition and/or construction of buildings in high-risk flood areas (Special Flood Hazard Areas or SFHAs). The amount of flood insurance coverage required is the lesser of the following: the maximum amount of NFIP coverage available for the particular property type, the outstanding principal balance of the loan or the insurable value of the structure.
If the property is not in a high-risk area, but instead in a moderate- to low-risk area, federal law does not require flood insurance; however, a lender can still require it. It is also recommended since historically one-in-five claims come from these moderate- to low-risk areas. Note that if during the life of the loan the maps are revised and the property is now in the high-risk area, your lender will notify you that you must purchase flood insurance.
Flooding occurs in moderate- to low-risk areas as well as in high-risk areas. Poor drainage systems, rapid accumulation of rainfall, snowmelt and broken water mains can all result in flooding. Properties on a hillside can be damaged by mudflow, a covered peril under the Standard Flood Insurance Policy. Structures located in high-risk flood areas have a significant chance (26 percent) of suffering flood damage during the term of a 30-year mortgage. In a high-risk area, your home is more than twice as likely to be damaged by a flood than by a fire. For these reasons, flood insurance is required by law for buildings in high-risk flood areas as a condition of receiving a mortgage from a federally regulated or insured lender.
The National Flood Insurance Program (NFIP) is administered by the Federal Emergency Management Agency (FEMA), which works closely with nearly 90 private insurance companies to offer flood insurance to property owners and renters. To qualify for flood insurance, a community must join the NFIP and agree to enforce sound floodplain management standards. The NFIP offers flood insurance, which can be purchased through property and casualty insurance agents. Rates are set and do not differ from company to company or agent to agent. These rates depend on many factors, which include the date and type of construction of your home, along with your building’s level of risk.
Our view is that your home insurance protection is not complete without flood insurance. We strongly recommend flood insurance for all homeowners.
Renting Your Home
This seemingly simple question is without a simple answer. Renting your home may jeopardize your homeowner insurance protection. If you are renting your house, we need to speak with you to better understand your specific situation to make sure your insurance protects you.
Your homeowner insurance is based on the exposure that exists at the time you originally apply for insurance – in other words when the application is completed. Problems arise when you change that exposure and do not update your policy. One of the big red flags is the holding for rental of your home. Homeowner policies are intended for owner-occupied homes. When the home is no longer owner occupied, there are significant exclusions and gaps in the insurance policy.
Yes, big differences. When it comes to rentals, there are several big questions. Is it occasional or seasonal (say 3 months or fewer out of the year), or is it a 12-month rental? Also, how many people are renting your home? The general rule is that you can rent part of your house on a permanent basis and your entire house on an occasional basis and still maintain protection in a homeowner policy, but the best practice is to always call and review your specific situation with a Cook Maran Associate.
If you need to purchase a new policy to cover the rental exposure, then yes, there is a possibility that your rates are higher.
Call your insurance adviser to have a complete conversation about exactly what you are doing – before the rental takes place.
You have the option to purchase physical damage coverage for your cars on your personal auto policy. Those two coverages have the odd names of “collision” and “other than collision.”
Collision is straightforward; it provides coverage to your auto, less the deductible, for upset of the auto or for impact with another vehicle or object. Run into another car, a fence or a mailbox? You’ll want collision coverage.
Formerly termed “comprehensive,” other than collision covers other physical damage, including fire, theft, windstorm, hail, flood, vandalism and glass breakage. Also included under this header is running into an animal, such as a deer, which is important for the wooded areas of Long Island, New York, New Jersey and Pennsylvania. Other than collision provides coverage for less the deductible.
Yes, in New York, full glass protection is available. For all covered losses to your window glass, coverage will be afforded without a deductible.
The cost/benefit for collision and other than collision coverage is generally seven years. Cars are a depreciating asset and the value goes down over time. The insurance rates don’t tend to drop as quickly as the value of the vehicle and that means the protection becomes less of a good deal over time. This is an individual decision, and your Cook Maran representative can research the current value of your vehicles and assist with more information.