Home Owner Insurance Hurricane

Percentage deduction puts more risk on homeowner

If you want to reduce your insurance premium, one of the easiest ways is to take on more of the risk yourself by raising the deductible that you would pay if there's a claim.

Now there's a type of deductible that is becoming more common and, at the same time, drawing complaints: the percentage deduction, sometimes known as the "hurricane deduction" because it is most commonly tied to hurricane-related damage.

So far it's an option only with some homeowner policies in Nebraska and Iowa. Customers can choose to have a deductible that is a percentage of the value of their home, rather than a fixed dollar amount.

For example, instead of a flat $500 deductible, a homeowner could choose a deductible of, say, 1 percent or 2 percent of the value of the home. A 1 percent deductible on a $100,000 home would be $1,000.

But some companies that write insurance policies in hurricane-prone states are requiring a 5 percent deductible. For a $300,000 house, that would make the homeowner responsible for the first $15,000 in repairs.

Those companies are trying to reduce the payments they would have to make for hurricane damage. In most such policies, according to the Insurance Information Institute, the percentage deductible applies only under narrowly defined circumstances, such as damage that occurs between two days before a hurricane and two days after.

Other damage, such as from fire, would still be subject to a flat dollar deductible per claim.

Steven Weisbart, chief economist for the institute, said so far he doesn't know of companies that require percentage deductibles in the Midwest.

Bruce Ramge and Susan Voss, the top state insurance regulators in Nebraska and Iowa, respectively, said some companies may offer it in their states as an option because it results in a lower annual premium.

This month in Connecticut, 22 insurance companies, which cover 80 percent of the state's homes, agreed to waive the percentage deductibles for claims caused by Hurricane Irene, which had lessened to a tropical storm by the time it reached Connecticut.

Home Insurance Quotes are Higher in Hurricane Prone States

With the number of hurricanes that hit the East coast, it is not surprising to find out that insurance rates have skyrocketed over the past few years. Due to the potential of such severe property damage, it is important to find a good homeowner’s insurance policy that covers everything you need at a reasonable price. I found many home insurance quotes online that have helped me compare policies. I urge everyone who lives in a hurricane prone state to re-evaluate their policy and look for affordable coverage.

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