Add It Up: Hurricane Deductibles and You

What’s worse than having a tornado rip through your home?  Having a tornado rip through your home and then having to pay an unexpectedly large deductible to your insurance company before damages can be assessed and repaired.

If this is your fear, it might be time to consider a move to New York because, despite being recently known as one of the hardest-hit states by Superstorm Sandy, there is currently talk in the State House of capping hurricane damage deductibles at a manageable $1,500.

According to an article by Reuters, “Many homeowners have already filed insurance claims in the wake of Sandy.”  It continues, “While hurricane deductible clauses are written in various ways, many designate a higher deductible to be paid for named storms designated hurricanes, said Robert Hunter, director of insurance for the Consumer Federation of America.”

What this means, in essence, is that the more serious the storm (since named weather occurrences tend to be the most damaging), the higher the probability that an insured homeowner will be required to pay an increased deductible in order to begin the process of repairing their homes, replacing their destroyed belongings, and moving on with their lives.  It may sound reasonable for a sliding scale to be used—the more extensive the damage, the higher the deductible.  But the entire reason that homeowners buy insurance in the first place is so they can pay a manageable price for repairs regardless of the damages that may be incurred.

Therein lies the existing problem according to homeowners, and apparently, some New York state lawmakers.  This is evidenced by bill S01760/A01222, which proposes that, “’The maximum deductible allowed shall not be greater than fifteen-hundred dollars and shall be stated on the policy in numerical terms,’” according to an article by Insurance Journal.

The publication goes on to relay that the bill also suggests “’a catastrophic windstorm deductible applicable to a homeowner’s insurance policy or dwelling fire personal lines policy shall not be approved by [New York State Department of Financial Services] unless the deductible is applicable only to losses incurred in a hurricane which causes wind speeds of one hundred twenty-five miles or greater per hour to occur within the state.’”

What would this bill’s passage mean for homeowners?  At face value,  they’ll be paying less money to insurance agencies if the bill is passed.  However, the cap will only apply for damages that are retained during such storms that fit within these specified terms – still, a welcome change to insured homeowners that will be able to reap the benefits and retain much of their hard-earned money.  Of course, this presumes the carrier isn’t forced to raise rates in order to cover the cap.  Opponents of the bill are also concerned that this may force an exodus of carriers writing policies in the most storm prone areas, which would be a very hard hit to homeowners.

The passage of this bill could be beneficial for adjusters in terms of customer service. Working with insured’s who are markedly happier about their deductibles (not to mention, their policy as a whole) as well as having the ability to quickly and effectively complete and close out claims in the wake of a natural disaster.  Always a welcome outcome for insureds and adjusters alike.  Will the bill pass? We’ll soon see.

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