What Is Hurricane Insurance?

Actually, hurricane insurance does not exist as a distinct type of policy. The term typically refers to what is, strictly speaking, a hurricane deductible on a homeowners insurance policy: an additional amount a homeowner must pay before the insurer will cover hurricane-related damage or destruction. This deductible, which is a percentage of the property's value, is common in 19 hurricane-prone states and Washington, D.C.

Hurricane insurance may also refer to specific types of catastrophe insurance that cover flooding or high winds (which actually do the damage to the property). These policies are also common – and sometimes required – in hurricane-prone states like Florida and Texas.

Understanding Hurricane Insurance

Hurricane deductibles differ from regular homeowners insurance deductibles in that they are calculated as a percentage of the home's value. While the deductible on a standard homeowners insurance policy is a fixed dollar amount—say, $500 or $2,000—a hurricane deductible could be 2% to 5% of a home's insured value, or $2,000 to $5,000 for every $100,000 in home coverage.

Hurricane deductibles were first introduced in 1992, following Hurricane Andrew's massive damage to South Florida, which resulted in significant losses for homeowners insurance companies, but they became more popular in 2005, following Hurricane Katrina. When insurance companies are having difficulty paying large amounts of claims all at once, they turn to reinsurers, but even reinsurance companies were struggling under such massive losses. As a result, insurance companies in 19 states and Washington, D.C. began requiring hurricane deductibles. These states' homes, which are all on the Gulf of Mexico or Atlantic Coasts, are vulnerable to hurricane damage.

A named hurricane must be present in the area for a homeowner to be required to pay a hurricane deductible. The deductible is sometimes triggered by a severe tropical storm. The hurricane deductible will apply to any damage sustained until the storm is downgraded. State laws differ.

Even if a hurricane deductible is not applicable, a windstorm deductible may be. A windstorm deductible applies to any type of high wind damage. It can be slightly lower than a hurricane deductible, sometimes as low as 1% of the insured value.

States Where Hurricane Deductibles Apply

Hurricane deductibles are applicable in the following states/regions:

  • Alabama
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Mississippi
  • New Jersey
  • New York
  • North Carolina
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Texas
  • Virginia
  • Washington D.C.

Policies Offering Hurricane Coverage

Homeowners should also be aware that even if they pay a hurricane deductible, there may be gaps in their coverage. Most homeowner policies exclude flooding caused by a natural disaster, such as a hurricane. As a result, property owners will need to purchase a separate flood insurance policy to cover such water-related destruction or damage.

In addition, in some hurricane-prone states, homeowners insurance policies do not cover wind-related damage. Those who want to protect their property would therefore need to purchase separate windstorm insurance. In this case, all wind damage or destruction would be covered by this policy rather than the standard homeowners policy. Windstorm insurance, in addition to hurricane coverage, covers problems caused by tornadoes, cyclones, and other types of high-speed winds.

How Hurricane Deductibles Are Calculated

Insurance companies, to some extent, dictate the level of the hurricane deductible and where it should apply, depending on the state. However, insurers' hurricane deductible plans must be approved by state insurance departments and may be subject to additional regulations and laws. In Rhode Island, for example, hurricane and windstorm deductibles are capped at 5%.

State law establishes some requirements in Florida, which is located in a particularly hurricane-prone region. Homeowners must have the option of a $500 flat-rate hurricane deductible, though their premium may be higher than if they choose one of the other mandated options: 2%, 5%, or 10% of the insured value of the home.

The good news is that homeowners in some states who make improvements to their homes to make them less vulnerable to hurricane damage will pay lower insurance premiums. Installing storm shutters or hurricane-resistant laminated glass windows and doors is one example of such an improvement.