Hurricane season is here. In addition to stocking up on shelf stable food and flashlight batteries, it is a good time to review your homeowners policy in order to be prepared for possible damage.
In coastal states like RI you need to understand the different types of coverage to consider. For example, your policy might have a separate deductible for weather related perils.
My own policy is up for renewal so lets take a look at some of the things we considered this year.
2% is more money than you think
Our policy had an overall deductible of $1500 and a separate 2% hurricane deductible. Notably that is not 2% on a claim, rather it is 2% of the dwelling value on the policy. So if my house (the structure not the contents) is insured for $450,000 then 2% is $9000. That means under my existing policy I pay the first $9000 of any hurricane related damage. In the event of a claim under $9000 then I would pay the full repair amount.
Is it windy?
Another policy option had a similar deductible for wind, which in New England that could be just about any storm -- think of all the Nor'easters this past year in which tree branches blew onto roofs. Even wind damage not related to a storm would be subject to the higher deductible. I thought that was too much exposure and kept shopping.
Named storm does not equal hurricane
Please note that a named storm is not necessarily the same thing as a hurricane. A named hurricane that makes its way up the coast and is down to a tropical storm when it hits my house would still trigger a named storm deductible -- back to that first $9000.
Wind and Water
Homeowners, myself included, might make the mistake of thinking that they aren't on the water so they don't need hurricane coverage. I learned that in fact water damage, even caused by a tidal surge, would be covered under a flood insurance policy, whereas storm related damage is typically considered due to wind -- imagine a tree limb blows into and breaks a window; the rain will come into your house, but it was caused by the wind...
What it means for you
You might need to dig deeper to understand what your weather deductible means. Wind, named storm, and hurricane coverage expose you to risk of loss (read out of pocket costs) in inverse order (wind = most exposure). So in the event of storm related damage this season, how are you covered?
With so many Americans not able to cover unexpected medical expenses, it seems likely that an unexpected storm related expense could be even more disastrous. It might be time to start saving for that deductible or looking for another plan.
Your advisor can help you determine your current risk and you will need to decide the level of exposure you are comfortable with. If you don't have a trusted advisor or are looking for another opinion our Risk Management Team can help.
What did we decide?
We found a plan with a slightly higher premium that offers a fixed $2000 hurricane deductible. Under my new plan, non hurricane related wind (winter storms) and named tropical storms will fall under my normal deductible and in the event of hurricane related damages I'll be paying less than half of the 2%.
Don't accept the first plan on face value. I can help you establish a set of questions to ask that will help you understand your coverage more fully.
Will you be reviewing your coverage? Establishing a weather related emergency fund?
P.S. if your are renting your property for income you might want to up that loss of use coverage. But that is a whole other kettle of fish...
Ask me how well is your rental is covered.
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