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    Wind Deductible vs. Hurricane vs. Named Storm Deductibles

    Posted by Geoffrey Gordon

    Thu, Aug 15, 2019 @ 09:40 AM


    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 location limits your choices and have this provision).

    House damaged by tree-927040-edited.jpgWhen a storm hits, the distinction between Named Storm deductibles, Wind storm deductibles and Hurricane deductibles can be important. 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 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 a mile 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.   Different insurance companies use different metrics for these specific peril deductibles. The three most common approaches are:

    1. Windstorm deductibles (the broadest, meaning it will affect the most people)  
    2. Named Storm deductibles (common) and
    3. 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 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 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 most 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 800-649-3252We can also research better offers for you - just click the link below. 

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    Geoff Gordon

    Tags: insurance, homeowners, storm, deductible, wind, windstorm, Coastal, deductibles, named, all other perils, AOP

    Hurricane Sandy- Déjà Vu

    Posted by Gordon Atlantic Staff

    Tue, Oct 30, 2012 @ 03:16 PM

    HurricaneA lot of us might be feeling some déjà vu after Sandy.

    Last year, Irene caused power to go out across the eastern coast, and Sandy has done the exact same thing. More than 75% of homes in Norwell, the town in which Gordon Insurance is located, have lost power from this storm.  All across Massachusetts and the south shore, schools canceled classes for Monday and Tuesday.

    The winds from Sandy caused several trees and branches to fall. These trees and branches landed on the roads, cars, power lines, and homes.  And, not only were the roads covered in tree debris, but these roads were also flooded. Flooded roads have an extremely higher risk of hydroplaning and car damage. Driving in these conditions is certainly not safe.

    Sandy was considered a hurricane until Monday night. At that point, she downgraded from a Category 1 hurricane to a tropical storm.

    Last year, Irene caused approximately 16 billion dollars in damage. It will take a few days to evaluate all the damage left from Sandy, but Sandy’s damage is estimated to be in the same ballpark as damage from Irene last August.

    One thing is certain: tropical storms and hurricanes do affect Massachusetts. Especially after seeing all the damage from Irene and Sandy, risk prevention and insurance certainly seem worth it.

    We have several hurricane resources for you, including checklists, a video, and other helpful links that can help you prepare for a storm.

    Read about what our staff have to say about hurricanes:

    If you have any other questions, do not hesitate to contact us. Learn about your hurricane resource options here.

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    Tags: home, tropical, damage, irene, hurricane, preparation, insurance, storm, Coastal, sandy, lessons

    Flood Zone Changes Affect Thousands of Homeowners in Massachusetts

    Posted by Val Feeney

    Thu, Oct 25, 2012 @ 04:52 PM

    This past July the Federal Emergency Management Association, otherwise known as FEMA, came to Massachusetts to review every community’s flood zone maps.  FEMA is in charge of mapping the entire country’s flood zones. These flood zones determine if your property is susceptible to a flood and the likelihood of it happening. After reviewing the flood zone maps, FEMA made thousands of changes, placing many previously low-risk neighborhoods into high-risk flood zones. 

    Be aware of the massachusetts flood zone changes with andrew gordon inc insurance norwell maMany homeowners on the coast of Massachusetts, most notably Hingham to Wareham, had their flood zone changed from “Outside the 100 Year Flood Plain” to “Inside the 100 Year Flood Plain.” This triggered a red flag on their mortgage or home credit line at their bank.  Banks require anyone “Inside the 100 year Flood Plain” (also known as SFHA – Special Flood Hazard Area) with a loan to have a flood policy on the home for the amount of the loan or for a maximum of $250,000, whichever comes first. 

    A flood policy for a home inside a flood zone (for $250,000) can be extremely expensive, and the bank expects the flood policy to be put in place within 30 days of notice, leaving many homeowners in a serious bind. Flood policies typically need to be paid in full at the time of issue. However, these homeowners have options.

    If the flood zone was changed from a non flood zone (C or X) to a flood zone (A, AE, VE, to name a few), the homeowner can get flood insurance based on the old zone for up to 2 years, under FEMA’s Preferred Risk Program. However, the rate may change from year 1 to year 2.  The home is ushered  into the program using the old zone to allow the homeowner time to save enough money for the new policy, or to hire an engineer to do an Elevation Certificate on the property. An Elevation Certificate can prove that the property is elevated enough above the flood zone, that it will never be touched by a flood. An example of this is a home on a hill or bluff overlooking the Atlantic Ocean. 

    Flood Insurance under the Preferred Risk Program is very reasonable, typically between $300-$1,000 for the year, and will cover $250,000 in building coverage and $100,000 in contents coverage.  

    Many banks are just now catching up to the flood zone changes from July, putting many homeowners on the South Shore of Massachusetts in this very scenario. 

    We have a flood resources page prepared just for you. If you have any questions about your insurance, contact us

    INSURANCE QUESTION? Home Quote Request
    Val Feeney

    Tags: home, insurance, FEMA, Marshfield, massachusetts, South Shore, ma, hingham, Flood, zone, changes, Coastal

    Insurance Near the Massachusetts Coast

    Posted by Geoffrey Gordon

    Wed, Jun 20, 2012 @ 09:03 AM

    Living on the coast of New England has always had its advantages: proximity to the beaches, the memorable sunrises/sunsets, and cool ocean breezes in the summer. Offsetting these advantages, however, are new challenges in insuring a home wherever these breezes keep you cool during the dog days of summer.

    Why do they cost more?

    Trust Andrew Gordon Inc Insurance Norwell MA with your coastal home insurance for the best coverage

    Insurance companies’ concern with coastal homes is not about floods (flood damage is excluded, and needs to be insured separately). It’s the wind.  Wind can knock down trees, phone and electrical lines, and damage roofs, exposing the rest of the house to rainwater and related problems. Wind poses a “severity” concern too, since one storm can generate large losses for many companies throughout a broad region. Not surprisingly, reinsurers (who provide catastrophic insurance for insurance companies) are demanding new restrictions on how coastal property owners participate in their own losses.

    How are insurance companies dealing with this?

    To moderate severity geographical concentrations, and to provide incentives to homeowners to protect against wind damage, most companies are imposing mandatory wind deductibles, near the coast. These are distinct and separate from your standard deductible. There are two categories, and the distinction can be important: “Named Storm” deductibles apply only to claims arising from a Named Storm (i.e. Class 3+ Tropical Storms & Hurricanes). A broader “Wind/Hail” deductible, applies to any wind/hail loss. When given the choice, a Named Storm deductible is preferred, simply because it won’t apply as often, such as on damage from winter nor’easters or summer thunderstorms… or the notorious “No-Name” perfect storm.

    How much is this costing me?

    These new deductibles are usually expressed as a percentage of your dwelling (house) amount, and range from 1% to 5% depending on location and a company’s existing exposure. For example, a 2% wind deductible on a home insured for $250,000 translates to $5,000, a significant amount to “self-insure”. Distances generally dictate the amount you share: less than 1000 feet from the shore (3% – 5% wind deductibles common), 1000’ —2500’ (2% common), 2500’ to 1 mile (“named storm” deductibles become available), and 1– 5 miles (more markets, more choices become available).

    Can you avoid a wind deductible if you’re within these ranges? 

    Sometimes. Contact Andrew Gordon Insurance for home insurance solutions that fit your budget and your tolerance for risk at our website. Get a coastal home insurance ebook here

    Home Quote Request Coastal Insurance  eBook  

    Geoff Gordon

    Tags: beach, home, summer, insurance, coast, homeowners, Flood, deductible, wind, Coastal

    Why Does Home Insurance Cost More in Coastal Towns?

    Posted by Gordon Atlantic Staff

    Tue, Oct 18, 2011 @ 02:25 PM

    Homeowners pay higher insurance rates when their house is coastal because of the increased risks learn more with Andrew Gordon Inc

    It’s a simple truth. If you live in a seaside community, you pay more for home insurance than your friends in neighboring inland towns. This may be true even if you live on the far outskirts several miles away from the pounding surf. The underlying reason you pay more is that the insurance company buys insurance to protect the company from financial ruin. An event such as a hurricane has the potential to cause widespread damage to an insurer's entire book of business. 

    Reinsurance

    The insurance that insurers purchase is called reinsurance. The cost of this reinsurance is built into your home insurance premium. Since companies pay more for reinsurance for homes near the coast, the lion-share of the cost is passed on to these homeowners. 

    How does reinsurance work?

    Let's use an example of fictional home insurer Windy Mutual with $100 million in assets. The number crunching actuaries determine that if a hurricane hits Massachusetts that Windy Mutual could pay out $200 million in losses. You don't need to be an accountant to see that that Windy would be out of business and unable to pay for policyholder losses.

    Let's say Windy Mutual purchases $180 million in reinsurance coverage with a deductible of $15 million every calendar year. Here's how a catastrophic event would play out. Hurricane Gaga strikes and Windy Mutual sustains $200 million in claims. Windy would pay the first $15 million from their own assets and the reinsurer would pay the remaining $185 million. This process occurs behind the scenes seamless to the policyholder. Windy Mutual recovers from the hurricane and stays in business with the help of reinsurance.

    Reinsurance broadens options globally across all lines of insurance coverages.  In the case of our coastal friends, reinsurance helps to stabilize the market and also helps consumers have more home insurance options. On the flip side, coastal homeowners are paying more for their home insurance than property owners in landlocked neighboring towns. Some would say this is fair distribution of the cost because the risks are higher for residents with beachy borders.

    Our agency, www.agordon.com, offers many solutions to property owners near or far from the coast. We can help you get the best price for your insurance if it is close or far from the shore.

    Learn more about coastal home insurance here.

    Home Quote Request Coastal Insurance  eBook  

    Tags: home, hurricane, insurance, reinsurance, seaside, beach front, Coastal

    Insurance Options Near the Coast: Why So Limited?

    Posted by Val Feeney

    Wed, Oct 05, 2011 @ 05:46 PM

    The options for insuring a home near the coast are dwindling. If you own a home on the coast, you’ve most likely seen your premium increase consistently over the past several years, or have been outright dropped by your carrier. In this article, we set out to determine why. 

    Coastal Population Growth

    Like most eastern seaboard states, the State of Massachusetts is experiencing rapid growth along its coast. A study by AIR Worldwide estimates the value of insured coastal property in Massachusetts to be $772.8 billion, ranking it only behind Florida, New York, and Texas in value. This represents 54 percent of the state’s total insured property values. The combination of this massive coastal insured value and its exposure to significant potential losses make it a risky area for insurance companies. So, many of the carriers cherry pick their “top-tier” policies and deny and/or increase premiums on the rest. 

    For this reason, the State of Massachusetts requires all companies writing property insurance in the state to participate in the Mass Fair Plan (MPIUA), which writes policies for homes that the carriers deem to risky or unprofitable. The state forces the carriers to share the losses for all Fair Plan policies.

    Learn about your coastal home insurance options for homeowners from Andrew Gordon Inc

    Cost to Insure

    The cause of these coastal homeowner rate increases, according to the carriers, is the increase in reinsurance costs they are charged for coastal property exposures. Reinsurance is insurance purchased by primary insurers to transfer their risk to other parties. The past several years have seen unprecedented losses throughout the Unites States, dealing large losses to the reinsurance companies. They are recovering from these losses by charging the insurance carriers more for reinsurance. Though there are over 3,000 property casualty primary insurers active in the US, there are only a handful of reinsurers that control the reinsurance market place. 

    Options for Homeowners

    So now that you know the reasons behind the rate increases for coastal homes, what are your options? There are still a few carriers in Massachusetts who will write property along the coast and islands. The guidelines are strict, but the rates are sensible. If you do not fit the carrier’s guidelines, you can quote your home with the Massachusetts Fair Plan. If your home is of significant value, there are other carriers at your disposal. 

    Contact an insurance professional, like Gordon Insurance, to get your coastal homeowners quote today. 

      Coastal Insurance  eBook Home Quote Request

    Val Feeney

    Tags: beach, house, property, insurance, ma, homeowners, Coastal, front

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