What Is Hurricane Insurance?

Actually, hurricane insurance doesn't exist as a specific, separate type of policy. The term usually refers to what is, strictly speaking, a hurricane deductible on a homeowners insurance policy: an extra amount a homeowner must pay before the insurer will cover the damage or destruction caused by a hurricane. A percentage of the property's worth, this deductible is common in 19 hurricane-prone states and Washington D.C.

Hurricane insurance can also refer to special types of catastrophe insurance that specifically cover flooding or extreme winds (which actually do the damage to the property). These policies are also typical—and sometimes required—in high-risk hurricane states, such as Florida and Texas.

Key Takeaways

  • There is no such thing as hurricane insurance, strictly speaking.
  • Coverage for the damage-inducing waters or winds that hurricanes cause is provided by flood insurance or windstorm insurance.
  • Many homeowners insurance policies in coastal states impose a hurricane deductible, an extra out-of-pocket amount the policyholder incurs before coverage kicks in.

Understanding Hurricane Insurance

Hurricane deductibles are separate from regular homeowners insurance deductibles and are based on a percentage of the home’s value. While a regular homeowners insurance policy deductible is a fixed dollar amount—say, $500 or $2,000—a hurricane deductible might be 2% to 5% percent of a home’s insured value, or $2,000 to $5,000 for every $100,000 in home coverage.

Hurricane deductibles first developed in 1992 after Hurricane Andrew’s massive damage to South Florida inflicted major losses on homeowners insurance companies, but they became more widespread in 2005, in the wake of Hurricane Katrina. Insurance companies turn to reinsurers when they’re having trouble paying large amounts of claims all at once, but even reinsurance companies were struggling under such enormous losses. As a result, insurance companies began requiring hurricane deductibles in 19 states and Washington, D.C. Homes in these states, which are all on the Gulf of Mexico or Atlantic Coasts, are susceptible to hurricane damage.

For a homeowner to be required to pay a hurricane deductible, there usually must be a named hurricane in the area. Sometimes a severe tropical storm will trigger the deductible. The hurricane deductible will be in effect for any damage that occurs until the storm is downgraded. Rules vary by state.

Even when a hurricane deductible doesn’t apply, a windstorm deductible might. A windstorm deductible applies to damage from any kind of high wind. It can run a little lower than a hurricane deductible, sometimes as low as 1% of the property's insured worth.

States Where Hurricane Deductibles Apply

The states/regions where hurricane deductibles apply are:

  • 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, gaps in their coverage might exist. Most homeowners policies exempt flooding from an outside natural event, like a hurricane. So, property-owners need a separate flood insurance policy to cover such water-related destruction or damage.

Most standard homeowners policies will cover some damage caused by hurricanes—mostly that related to the heavy wind that, say, rips shingles off a roof or causes a tree branch to snap and crash into a window.

Also, homeowners insurance policies in some hurricane-prone states won’t pay for wind-related damage. So those wishing to protect their property would have to purchase separate windstorm insurance. In this case, all wind damage or destruction would fall under this policy instead of the traditional homeowners policy. On top of hurricane coverage, windstorm insurance applies to problems stemming from tornadoes, cyclones, and other types of high-speed winds.

How Hurricane Deductibles Are Calculated

To some degree, depending on the state, insurance companies dictate the level of the hurricane deductible and where it should apply. However, insurers' hurricane deductible plans are subject to state insurance departments and may be subject to various regulations and laws. Rhode Island, for example, sets a cap of 5% on hurricane and windstorm deductibles.

In Florida, located in a particularly hurricane-prone region, state law sets some requirements. Homeowners have to have the option of a $500 flat-rate hurricane deductible, although their premium may, of course, be higher than if they choose one of the other mandated options: 2%, 5%, or 10% of the insured value of the residence.

The good news is that homeowners in some states who make improvements so their homes will suffer less damage from a hurricane will pay lower insurance premiums. An example of such an improvement is installing storm shutters or installing hurricane-resistant laminated glass windows and doors.