Irene Raises Hurricane Deductible Questions in Northeast States

New York and New Jersey regulators said recently that hurricane deductibles should not apply on homeowners’ insurance policies for Irene damages in their states. That’s because Irene was downgraded and designated as a tropical storm, not a hurricane, when it reached those states, according to the officials.

They said standard dollar deductibles should apply instead of the hurricane deductibles, which are based on a percentage of a property’s insured value rather than a set dollar amount. This distinction could save the insureds whose homes suffered wind damage from Irene thousands of dollars in out-of-pocket costs.

“While Irene obviously started out as a hurricane, by the time it reached New York it was a tropical storm, with winds in the 60 mph range,” New York Superintendent of Financial Services Benjamin Lawsky stated on Sept. 1. “This makes a big difference for homeowners because it means that special hurricane deductibles will not kick in, saving them thousands of dollars.”

The New York Insurance Department said it has spoken to a number of insurers that agreed that Irene was a tropical storm in New York and confirmed that hurricane deductibles would not apply. “We believe this would apply to all home insurers providing coverage in New York,” the department’s communications director David Neustadt told Insurance Journal. “As to savings, that would depend on the individual policy, the insured amount of the individual property and the amount of damage. Different companies have different deductibles. But it could be substantial.”

New Jersey’s department also said hurricane deductibles would not apply.

In Connecticut, hurricane deductibles are permitted only on coastal properties. And on some policies – and it varies by company – the hurricane deductible is triggered when a mere hurricane warning is issued for the state. This was the case with Irene, even though it was downgraded by the time the storm hit. Now it is up to the insurers whether they want to apply the hurricane deductible, said Donna Tommelleo, of the Connecticut department.

Connecticut officials have been negotiating with insurers to waive hurricane deductibles for coastal homeowners. Insurance Commissioner Thomas Leonardi said the companies that have either waived the hurricane deductibles or have coastal policies in which their triggers have not been met represent about 80 percent of homeowners’ insurance market in Connecticut.

In Vermont, another state hard hit by Irene, hurricane coverage does not have deductibles, said David Mannis, information manager for the Vermont Department of Insurance.

According to the Insurance Information Institute, the District of Columbia and 18 states allow hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas, and Virginia.

Hurricane deductibles typically range from one to five percent but can be higher in coastal areas, according to the III. In some cases, insurers make them mandatory for homes in high-risk coastal areas.

Topics Catastrophe Natural Disasters New York Hurricane New Jersey Homeowners Connecticut