Hold On to Your Hurricane Insurance — and Your Roof

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This post comes from Bridget Mintz Testa at partner site Insurance.com.

Despite forecasters’ predictions for a severe hurricane season, so far 2013 has produced only two hurricanes. Hurricane Humberto nearly tried the record as the latest first hurricane of the season (Sept. 11) since satellite tracking began, followed by Hurricane Ingrid. Forecasters warn there could still be multiple hurricanes before the season ends Nov. 30.

This means you can use the time you might have spent preparing or recovering from a storm to assess your home insurance policy as well as your home’s construction to get ready for the rest of hurricane season.

How hurricane deductibles work

For homeowners on the Atlantic and Gulf coasts, insurers charge higher premiums for windstorm insurance and impose hurricane deductibles that must be paid before the company pays anything.

Standard homeowner deductibles are dollar amounts such as $500 or $1,000, but hurricane deductibles are based on a percentage of the insured value of the property — usually 1 percent to 5 percent, but up to 10 percent in Florida. So, for example, if your $200,000 house has a 2 percent wind damage deductible, you’d have to pay $4,000 toward repairs before your insurance company kicked in any money.

You can find your windstorm percentage deductible by checking the declarations page of your windstorm or homeowners policy. Be advised that windstorm deductibles only go into effect under certain conditions. Each insurer has its own “trigger” that determines when a windstorm deductible kicks in. Triggers may be determined by the nature of the storm (such as whether the event is officially declared a “tropical storm” or a “hurricane”) or the storm’s intensity — for instance, if it’s defined as having sustained winds at landfall over 55 mph.

“Insurance companies must have money on hand to pay claims, so they must plan for disasters. They must make sure that the rate they charge matches the risk, so higher risks lead to higher rates,” says Lynne McChristian, spokesperson for the Insurance Information Institute, an industry organization.

Insurers set their own deductible percentages except in Florida, where the state mandates them. Each time a storm occurs, expect increases in premiums and deductibles if you don’t lose the insurance altogether.

“After a natural disaster, insurance companies will look at the claims and reassess,” says McChristian. “Insurance is in the risk management business. To manage their risks, insurers may decide not to write as many policies or they may choose to keep their current book of business, but not write new policies.”

What to do if you lose hurricane insurance coverage

If you lose hurricane coverage and can’t get it from other companies, investigate your state-run “pool” plan. These plans are sometimes known as beach or fair access to insurance requirements (FAIR) plans. “Pools are markets of last resort for people who can’t purchase property insurance in the private market,” said Chris Hackett, director of policy development and research for the Property Casualty Insurance Association of America.

For example, if you are buying a home in one of Texas’ 14 coastal counties or certain parts of Harris County, your policy might exclude coverage for hurricanes and windstorms. In that case, you may be able to purchase this coverage from the Texas Windstorm Insurance Association. Pool plans are not cheap and may levy significant location surcharges. To find your pool plan, start with your state’s department of insurance website.

“Excess and surplus line” carriers provide another option. “E&S” companies are legitimate, but they don’t seek state licensing. They are carefully vetted for financial strength by state insurance departments, which also impose strict limitations on them before they can write policies. However, without licenses, E&S companies are not bound by state rate regulations. They can set their own rates, so expect sticker shock. Learn more about E&S companies and their local agents and get a list of those operating in your state at your state insurance department’s website.

Harden your home against hurricane damage

With proper planning ahead of time, there are ways to shore up your house to prevent severe windstorm damage. The Institute for Business and Home Safety, an insurance industry-supported research organization, offers advice on how to “harden” or “mitigate” homes to stand up to hurricanes. One of the most important mitigation techniques is keeping your roof from blowing away.

It’s easiest to harden a home, including holding down the roof, during construction. “With a new house, tie everything together,” says Tim Reinhold, IBHS’s senior vice president of research and chief engineer. “The most common methods are to use hurricane clips and straps that tie the house together from roof to foundation. If the roof isn’t tied to the studs and down to the foundation, it doesn’t provide the necessary path to take the forces [of the wind]. When a house is tied together, it engages the weight of the walls and the foundation to hold the roof and everything else down,” Reinhold says. Implementing tie-downs during building will run about 2 percent of the house’s cost.

If you are re-roofing an existing house, you can retrofit a tie-down with the same methods, but it “will cost 10 percent to 15 percent of the cost of the house,” Reinhold says. “If you’re not ready to re-roof, you can have a professional apply spray foam adhesive between the joints and along the sides of rafters or trusses to seal them and attach them to the roof deck.” The adhesive isn’t as good as a tie-down, but it helps.

Some IBHS techniques are do-it-yourself. For jobs you can’t do, “hire licensed and bonded construction companies that are local and have been in the area for a while,” Reinhold says. When the job is finished, “have a building inspector come in and make sure the work was done properly,” he says. “It is the first level of assurance.”

You may recoup some of your mitigation costs, thanks to state legislation. In these states, hardening a home could give you mandatory or optional reductions in insurance premiums or hurricane deductibles:

  • Alabama
  • Florida
  • Louisiana
  • Maryland
  • Massachusetts
  • Mississippi (only for the state pool)
  • New Jersey
  • North Carolina
  • Rhode Island

In addition to the above, the following states allow insurers to use windstorm deductibles:

  • Connecticut
  • Delaware
  • Georgia
  • Hawaii
  • Maine
  • New York
  • South Carolina
  • Texas
  • Virginia

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