Understanding Hurricane Deductibles
Hurricane deductibles are not the same as a traditional deductible. Unlike a basic deductible for a flat amount, lets say $1,000, a hurricane deductible is generally a percentage of the dwelling amount, and are applied only in specific scenarios. Not all policies have a hurricane deductible.
When shopping for insurance some insurance carriers may include a deductible to reduce your costs. Keep in mind that this may have an impact on your ability to pay for damages after a Hurricane. In some states or coastal areas a Hurricane deductible is fairly standard and difficult to acquire coverage without this clause.
As more hurricane find areas that have not previously been affected, these deductible are becoming more the norm.
We list the regulations below for the following states.
In December 2011, the Connecticut Insurance Department issued an Important Notice which announced guidelines that supersede the Nov. 9, 2009, edition of the Filing Review Guidelines Related to Underwriting Coastal Homeowners Insurance Policies, which set forth "minimum standards" for when a hurricane deductible may be triggered and applied. In the aftermath of Tropical Storm Irene in 2011, these revised guidelines were intended to clarify and provide direction to the insurance industry.
The Connecticut Legislature passed Public Act 12-62, which was signed into law in June 2012 and codified the department’s bulletin. According to the act, insurers are allowed to impose a hurricane deductible in the policy in lieu of an overall policy deductible for homeowners and certain other policies issued or renewed on or after July 1, 2012, if a hurricane results in a maximum sustained surface wind of 74 miles per hour or more for any part of the state. This provision applies to a 1) homeowners, tenants, mobile manufactured home, and other property and casualty insurance for personal, family or household needs other than workers' compensation insurance; 2) condominium association master policy; and 3) unit owners' association property insurance policy.
The deductible applies from the time the National Hurricane Center issues a hurricane warning for any part of this state and ends 24 hours after the National Hurricane Center 1) terminates the last hurricane warning for any part of this state, or 2) issues its last downgrade of the hurricane from hurricane status for any part of this state, whichever is earlier.
This provision is effective Oct. 1, 2012, but the bill applies it retroactively to policies issued or renewed between July 1, 2012, and then.
The Connecticut Insurance Department issued an Important Notice to the Oct. 26 Insurance Department notice, advising that "a hurricane warning was not issued for the State of Connecticut nor did Connecticut sustain hurricane force winds as a result of Storm Sandy. Therefore pursuant to Public Act 12-162 Section 1. (b) and the Department's Filing Review Guidelines Related to Underwriting Coastal Homeowners Insurance Policies re-issued on December 9, 2011, (the "Coastal Guidelines") as it relates to the use of hurricane deductibles companies may not impose a hurricane deductible on Connecticut claims."
New Hampshire does not have any statutes,rulings or regulations addressing the permissibility of hurricane deductibles.
N.J.A.C. 11:2-42.7 provides that the uniform policy language insurers shall utilize for all mandatory and optional hurricane deductible programs for homeowners insurance as set forth in Exhibit D in the Appendix to subchapter 42. Exhibit D provides, in pertinent part, that "[a hurricane] deductible applies as described below, in the event of direct physical loss to property covered under this policy, caused directly or indirectly in the event of a hurricane named by the National Weather Service or its successor from which sustained hurricane force winds of 74 miles per hour or greater have been measured in New Jersey by the National Weather Service (regardless of whether the sustained hurricane force winds reach the risk insured under the policy) and shall replace any other applicable deductible in that event." Accordingly, the Department of Banking and Insurance Bulletin 11-16 states that no mandatory or optional hurricane deductible should apply to property losses attributed to Hurricane Irene, as the National Weather Service did not report wind speeds in New Jersey of sufficient force to trigger the conditions under which hurricane deductibles can be imposed under uniform policy language for homeowners insurance.
The New York Insurance Law and regulations promulgated thereunder do not specifically address whether an insurer may include a windstorm deductible as part of a condominium or co-op homeowners insurance policy. However, Insurance Law Section 2307(b) generally requires that any property/casualty policy form or endorsement thereto that is to be issued or delivered in New York state must be approved by the superintendent of insurance. Further, the superintendent may disapprove the use of the policy form if he finds the form misleading or against public policy. In 2010, the Insurance Department circulated, but never adopted, a draft regulation that would have imposed limits on hurricane deductibles, including having them apply only after a hurricane makes landfall. New York State Insurance Regulation 159 (11 NYCRR 74): Homeowners Insurance Disclosure Information, pursuant to Chapter 44 of the Laws of 1998 and Chapter 162 of the Laws of 2006, provides that the superintendent establish by regulation disclosure requirements with respect to the operation of any deductible in a homeowners insurance policy or dwelling fire personal-lines policy which applies as the result of a windstorm. Further, Insurance Law Section 3445 requires such regulation to prescribe the form of a notice to be provided by an insurer to an insured and provides that the notice shall explain in clear and plain language the amount of the deductible, the circumstances under which the deductible applies and any other matters which the superintendent, in his or her discretion, shall deem necessary or appropriate. Accordingly, "Irene was designated a tropical storm, not a hurricane, when it reached New York and, therefore, hurricane deductibles did not apply on homeowners insurance policies…."
The Department of Financial Services has released an update to its list of approved windstorm deductible by insurance company list.
For more information on windstorm and hurricane deductibles in our neighboring states, click here.