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Don't let hurricane season blow your homeowners insurance off course
June 30, 2010
Ask your provider to explain those complex deductibles
FOR IMMEDIATE RELEASE
Russ Dubisky, Executive Director
803-252-3455 or cell phone 803-708-5271
russd@scinsnews.com
Columbia, S.C. – June 29, 2010 – Hurricane Alex reminds us that hurricane season is well under way, and the South Carolina Insurance News Service encourages you to review your coverage with your insurance agent or provider. Part of your review should include a look at your deductibles.
Do you know what your deductibles are?
A deductible is the amount of loss paid by the policyholder before insurance kicks in. Different insurance companies offer different types of deductibles. Two common types include:
• a traditional, dollar deductible. With a policy that has a traditional $1,000 deductible, the policyholder is responsible for the first $1,000 of damages.
• or, a percentage deductible. Percentage deductibles are based on the home's insured value. So if a house is insured for $200,000 and has a two percent deductible, the first $4,000 of a claim must be paid out of the policyholder’s pocket.
Since most homes along the coast of South Carolina have policies with percentage deductibles for named storms or hurricane damage, here are some other things you should know:
• Percentage deductibles are applied differently by different insurance companies. Deductibles might be called a "Named Storm Deductible," "Tropical Cyclone Deductible," or a "Hurricane Deductible." Percentage deductibles vary from 1 percent of a home's insured value to 10 percent.
• Some companies use a "trigger" event for percentage deductibles, to denote the point at which the deductible applies. While triggers vary depending on your insurance company, many have some common characteristics: They generally go into effect only when the National Weather Service issues a hurricane watch or warning and remain in effect for 24 to 48 hours after the storm has passed. The intensity of a hurricane also affects the trigger. Hurricanes are classified on a scale of one to five, with five as the highest intensity.
• In coastal areas of South Carolina, percentage deductibles are required by some insurance companies. When these mandatory deductibles apply, insurers will not sell homeowners insurance without a hurricane deductible. Where deductibles are optional, policyholders may choose lower deductibles in exchange for a higher premium (a buyback) or higher deductibles for a premium credit.
• Percentage deductibles can range from 1 percent to 10 percent for both residential and commercial insurance policies. Your policy may contain more than one deductible. For example, your standard homeowners policy deductible may be $1,000, but you might have a 2 percent wind deductible. So if your home is insured for $200,000, you would incur a 2 percent deductible for claims for damage from any qualifying trigger. The total out-of-pocket expenses for a wind or hail claim could then be 2 percent of the home's insured value, or $4,000 in this example.
• Some coastal residents may also obtain a policy through the South Carolina Wind and Hail Underwriting Association (SCWHUA) in the event coverage is unavailable through the private market. The SCWHUA offers deductibles of 2 percent to 10 percent that apply in the case of any qualifying wind or hail event.
• South Carolina law enables homeowners to set up catastrophe savings accounts to help pay their deductibles. The money can be set aside, state income tax-free, to pay for qualified catastrophe expenses such as an insurance deductible or other uninsured costs associated with a hurricane, flooding or windstorm event. It is important to plan how you will pay your deductible in the event of a claim, for both dollar and percentage deductibles. (Read more about catastrophe savings accounts at http://www.doi.sc.gov/faqs/CatSavingsAcct.htm.)
For more information from the S.C. Insurance News Service, or to schedule an interview, call (803) 252-3455, or e-mail russd@scinsnews.com. For more about homeowners insurance, go to http://www.scinsurance.net
For more than 30 years, the South Carolina Insurance News Service, a nonprofit organization, has been providing property and casualty insurance information to consumers in South Carolina. The South Carolina Insurance News Service is funded by insurance companies doing business in South Carolina.
For more information, contact the South Carolina Insurance News Service at 803-252-3455 or use our contact form.
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