You call the insurance company after a big nor'easter or hurricane, with a tree sitting on your house, and they tell you that you have a "wind deductible." What's that?
It's a separate deductible from the one that applies to everything else to lower the cost of storms to insurance companies in wind-prone regions. There are a few variations beyond just "wind," and we'll look at which are better (if your address demands that you have this provision).
When a storm hits, the distinction between Named Storm deductibles, Wind storm deductibles and Hurricane deductibles can become important, and can be worth thousands to tens of thousands of dollars. The distinction is particularly important if you live or own property in a coastal county in Massachusetts, such as Plymouth, Dukes, Barnstable, Bristol, Suffolk and Essex, because all are generally available and choosing the right one might make a huge difference in the cost to repair your home after a storm.
Here's how it works: these deductibles are applied separately for a higher dollar amount than your standard deductible, known as “all other perils” (AOP) deductibles. For example, if you have a $1,000 deductible for fire, theft and all other perils and you live on the coast, you may have a $2,000 or higher deductible for windstorm and hail losses.
More common than dollar amounts however, wind deductibles are often expressed as a percentage of the coverage amount on your home. For example, a 1% wind deductible on a $300,000 home would be $3,000 and a 2% wind deductible would be $6,000. A 5% wind deductible on a $700,000 home is $35,000!! Here in coastal Massachusetts counties, 1%, 2% and 5% wind deductibles are common if your property is within 0-5 miles of the coast.
These deductibles are part of an effort by the insurance industry to limit their storm losses by having homeowners share more of the repair costs when the wind blows. Informed property owners - that's you - can take steps to protect homes when especially vulnerable to wind damage. After all, if you have a 5% deductible on half a million dollar house, you’ve got 25,000 good reasons to consider storm shutters, a generator, the highest quality shingles, fewer trees in the yard, and other protections.
If you have a wind deductible it normally will appear right on the "declarations" (first) page of your homeowner’s insurance policy. Yup, it pays to look at your policy - and if you're reading this blog, you've probably seen this on your policy. Different insurance companies use different metrics for these specific peril deductibles. The three most common approaches are:
- Windstorm deductibles (the broadest, meaning it will affect the most people)
- Named Storm deductibles (common) and
- Hurricane deductibles.
The broadest of these three, meaning where it will apply to the most consumer claims, is a Windstorm deductible. These deductibles apply whenever damage is caused by wind; these include not only hurricanes and other tropical storms but also winter nor'easters and summer thunderstorms. Any kind of wind damage will prompt this higher exposure to the owner.
The next category is Named Storm deductibles. To illustrate, remember the notorious “no-name" storm? Damage from that storm would not have been subject to a higher Named Storm deductible, but would have under a Wind deductible. The regular, smaller AOP deductible would have been used for any damage caused by the no-name storm under a Named Storm deductible. But damage from Hurricane Irene or Hurricane Sandy, or other named storms would have invoked the Wind and/or Named Storm deductible.
Finally, there are the most restrictive Hurricane deductibles. Hurricane Sandy is a particularly good example of the distinction between Named Storm and Hurricane deductibles. When Sandy made land fall in New Jersey she had been downgraded from a Category I hurricane to a tropical storm. Thus, the lower AOP deductible applied to folks with a Hurricane deductible. Hurricane deductibles have become less common due to the potential for political interference after the fact, as was evident with Sandy. Some suggested that the downgrade of Hurricane Sandy was precisely announced to shield homeowners from the Hurricane deductible. Good for consumers with that one event, but insurance carriers want to quantify risk precisely, and after the fact interference prompted changes for the next event. Thus what were Hurricane deductibles have morphed into Named Storm deductibles in many coastal regions.
Many considerations should factor in your choice of insurance companies for selecting homeowners and other property insurance. But all else being equal, and given the option between Windstorm vs. Named Storm, choose Named Storm as it is more restrictive. Given the choice between Named Storm and Hurricane deductible, you should choose a Hurricane as it’s the least likely to be invoked.
For more information on the subject, check out our short but super-informative whiteboard video where we give cost examples of various deductible options near the coast.
If you've just discovered you have a higher wind deductible than you are comfortable with, contact us at 800-649-3252. We can also research better offers for you - just click the link below.