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What's a Hurricane Deductible, and Do You Have One?

Zillow

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Photograph via Zillow

You may have heard the optimistic forecasts for the 2014 hurricane season, which began June 1. The Colorado State University team that most notably does these predictions expects 10 named storms, 4 of which will become hurricanes. That’s fewer than the long-term average of 12 named storms and 6 hurricanes per season. So you can rest easier, right?

Not so fast. For one thing, experts at The Weather Channel aren’t quite as positive. They call for 11 storms and 5 hurricanes. For another thing, any of those hurricanes could cause serious damage. That means you could find yourself owning a home in need of serious repairs.

Are you covered under home insurance?

The answer in part depends on the cause of the damage. Standard homeowners insurance doesn’t cover flooding; you’ll need a separate flood insurance policy for that. Check out the National Flood Insurance Program for more information. One caveat: Flood policies don’t take effect for 30 days, so you should act quickly to get your protection in place before the threat ratchets up in late summer/early fall.

But what about wind, the other main source of damage for hurricanes? You’re in better shape there. Standard home insurance policies typically cover wind damage — after you meet your deductible.

Do you know your deductibles?

The deductible is the amount you must pay out of pocket when you file a claim for damage from a covered peril such as fire or hail — or wind. Most people set their policy deductibles at $500 or $1,000, which means that’s the most they’d likely have to pay to repair damage in case of a covered claim.

But it doesn’t always work that way with wind damage from hurricanes. Many policies, particularly for homes in areas along the Atlantic and Gulf coasts, have separate hurricane deductibles. These aren’t expressed in dollars; they’re formulated as percentages, usually 1-5 percent of a home’s insured value. For example, the owner of a home insured for $300,000 with a 2 percent hurricane deductible would have to pay the first $6,000 of a claim for hurricane wind damage.

What’s in wind speed?

Now a bit of good news: Hurricane deductibles generally only are activated if a storm makes landfall with sustained wind speeds of more than 74 mph — the threshold that separates tropical storms from full-blown hurricanes.

When Superstorm Sandy made landfall in the Northeast in late October 2012, its winds were not strong enough to be characterized as a hurricane. Considering that insured losses from the storm totaled nearly $19 billion, homeowners saved millions when it was downgraded.

What homeowners should do

First, don’t count on rosy forecasts. Even the Colorado State University professors believe there will be one major hurricane during the season, which runs through November. Don’t gamble that it will miss you.

Second, know your deductible, or deductibles. They’re spelled out on the declarations page of your home insurance policy. If you can’t find them, ask your agent. If you don’t like what you find out, it won’t hurt to shop your coverage with other carriers.

Either way, it’s a good idea — if you live in an area threatened by hurricanes — to start thinking about how you’d pay that deductible now. Otherwise, your financial stability could be blowin’ in the wind.

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Arthur Murray writes for HomeInsurance.com, an online insurance resource for homeowners and drivers across the country. Offering comparative homeowners and automobile insurance rates, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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