If you live in Florida, you know that most hurricanes taper off into mere rain storms—even if a landlocked state out west would think that storm was a monsoon. You also know that, sometimes, the hurricane doesn’t taper off. Sometimes, it grows into a Category 5 and leaves severe damage in its wake.
In 2005, Hurricane Katrina changed many lives forever, but it also became the costliest hurricane on record, resulting in over $41 billion in insured losses alone. The hurricane served as a wake-up call for insurance providers in the 19 states along the Atlantic coast.
And it was then that the hurricane deductible became widely accepted, although first introduced after Hurricane Andrew. Now, if you have home insurance in Florida, you most likely also have a hurricane deductible.
As we enter hurricane season, it’s important to understand how your hurricane deductible impacts a home insurance claim so you can ensure that your home and wallet are adequately protected.
What Is a Hurricane Deductible?
In home insurance, a hurricane deductible is a separate deductible requirement that applies when you suffer from hurricane wind damage specifically.
In Florida and other Atlantic-coast states, you have two deductibles: your AOP deductible and your hurricane deductible. Your hurricane deductible applies to covered damage caused by hurricane winds. Your AOP deductible—or “All Other Perils” deductible—applies to all other covered losses.
You can check your declarations page (the first page of your home insurance policy) to find out what your hurricane deductible is.
Important: Like the rest of your home insurance coverage, hurricane coverage does not cover damage from flooding or storm surge. The only way to protect against water damage from a flood or storm surge is to purchase flood insurance.
To learn more about hurricane coverage and how it works, check out The Complete Guide to Hurricane Coverage in Florida.
Deductibles vs Premiums
To clarify, your premium is the amount you pay for insurance monthly or annually. The premium is paid whether you suffer a claim or not.
Your deductible is the amount you pay when you have a claim before your insurance covers the rest.
How Does a Hurricane Deductible Work in Florida?
Hurricane deductibles and the rules around them are set by state law and apply to all insurance providers in a state. As a result, the following answers apply to all home insurance providers in Florida.
When Does My Hurricane Deductible Apply?
A trigger is a storm event that determines when you have to pay your hurricane deductible for a claim instead of your AOP deductible.
In Florida, your hurricane deductible is triggered as soon as the National Hurricane Center issues a hurricane watch or warning for any part of Florida. The trigger lasts until 72 hours after the end of the watch or hurricane. So, your hurricane deductible applies if you have a claim anywhere between the start of a hurricane watch and 72 hours after the watch or hurricane ends.
A hurricane watch is issued 48 hours prior to when experts predict the storm will arrive, and a hurricane warning is issued 36 hours prior. Be sure to use this time to prepare your home for the potential hurricane.
In Florida, your hurricane deductible does not count towards a claim made during a tropical storm. The storm must be declared a hurricane by the National Hurricane Center for the hurricane deductible to apply.
What Is the Average Cost of a Hurricane Deductible in Florida?
Florida statute 627.701 details the law regarding the cost of hurricane deductibles.
In Florida, all insurers must at least offer the hurricane deductible options of a $500 flat fee or 2%, 5%, or 10% of your home’s insured value (the amount you have set as the cost to rebuild your home) for homes insured up to $250,000. If the cost to rebuild your home is $250,000 or more, insurers are only required to offer the percentage deductibles.
As a result, hurricane deductibles are usually one of the percentage options.
Important: The cost to rebuild your home is not the same as what you paid for your home or its market value. Rather, this is an estimate of how much it would cost to rebuild your home from the ground up, and it depends on factors like building materials, style, and size.
What does this look like in practice?
Say the cost to rebuild your home is $400,000. A normal hurricane wind insurance deductible of 2% would equal $8,000. (This is because 400,000 x 0.02 = 8,000.)
That said, insurance providers can choose to offer more deductible options in addition to those required. With OpenHouse Home Insurance, for example, you can choose between percentage deductibles of 2%, 3%, 5%, and 10%, as well as flat dollar deductibles of $1,000, $2,500, $5,000, and $10,000.
Ultimately, how much your hurricane deductible costs can vary widely and depends on two factors:
- The cost to rebuild your home
- The deductible option you choose
What If I Have More Than One Hurricane Claim a Year?
Living in Florida, it’s no surprise when a second (or third) hurricane shows up within months of the first. So, what happens if hurricane winds damage your home more than once?
The rule is that no matter how many hurricane claims you have, you only have to pay your hurricane deductible once per calendar year (aka January 1st to December 31st). This rule applies as long as you are with the same insurance company or insurance company group you paid the deductible to.
Here’s what your hurricane deductible looks like in action.
1st Hurricane Claim
You pay for the repair costs up to your hurricane deductible amount. If you pay your full deductible and more costs remain, insurance covers the rest.
- If the cost to repair your home is $15,000 and your hurricane deductible is $5,000, you will pay the $5,000, and your insurance will cover the remaining $10,000.
- But, if the cost to repair your home is $4,000 and your hurricane deductible is $5,000, you will have to pay the full $4,000 and will have $1,000 remaining in your deductible.
2nd Hurricane Claim Within the Same Year
If you haven’t paid your full hurricane deductible yet because damages weren’t costly enough for the first claim, you’ll pay the remainder here. Then, if costs remain, insurance covers the rest.
If you did pay your full hurricane deductible during the 1st claim but haven’t already paid your full AOP deductible, then your AOP deductible applies instead. Insurance covers the remaining costs once your AOP deductible is paid. (Now that your AOP is also paid, this means any future covered claims will be paid by your insurance for the year.)
- If the cost to repair your home was $4,000 during the first claim and your hurricane deductible was $5,000, you have $1,000 left to pay towards your deductible. So, if a 2nd claim occurs and the cost to repair your home this time is $10,000, you will pay the $1,000 you still owe, and insurance will cover the remaining $9,000.
- If the cost to repair your home was $4,000 during the 1st claim and your hurricane deductible was only $2,000, then insurance would have paid the remaining $2,000 on the 1st claim. Now that you have a 2nd claim and your hurricane deductible is paid off, your AOP deductible will apply instead. If the damage this time is $10,000 and your AOP deductible is $5,000 (and you haven’t paid any of the AOP deductible this year), you will pay the $5,000 for the AOP deductible, and your insurance will cover the remaining $5,000.
Tips for Choosing Your Hurricane Deductible
As you can tell, the hurricane deductible you choose plays a crucial role in how much of your loss you’re required to pay for if a hurricane hits and damages your home or belongings.
Your deductible also affects your premium: The higher the deductible, the lower the premium. But, before you rush into the highest deductible possible to lower your premium, it’s also essential to make sure you can afford the deductible in case you ever have to pay it.
The following tips will help you find the right balance.
- Consider what you can pay out of pocket: To keep your insurance coverage, you need to be able to pay the premium. As a result, a premium you can afford is a must. Paying in installments can help you break the annual cost of insurance into smaller, more manageable amounts.
- Consider your current savings: While a high deductible is ideal, you also want to have enough in the bank to afford the deductible you choose if you ever have to pay it. If possible, don’t choose a deductible you can’t already afford without going into debt.
- Consider what you can save: If it’s not currently hurricane season, and you know you can save enough to cover a higher deductible before it rolls around, you may still opt for the higher deductible. But keep in mind the risk: you may lose the opportunity to save as much as you hoped, and although we have a hurricane season, nature can break the rules.
- Consider your risk sensitivity: A general rule is that a high deductible/low premium is better when you have no claims (because the premium is lower and you don’t have to pay the deductible). But, a low deductible/high premium is better when you end up with a claim (because you will have to pay the deductible).
On average, you probably won’t have a claim every year, so the high deductible/low premium combo wins out more often. However, a low deductible option will feel safer if you don’t like to take on risk.
- Consider the costs of a typical claim: The average cost of a Wind and Hail claim is $11,695. If you can afford this amount, you may be better off saving on your premium with a high deductible. However, this is a risky strategy. The point of insurance is to protect your home from the unexpected, and if a hurricane blows your home off the map, your claim cost could be much higher than the average.
Overall, the best advice is to choose the highest deductible you feel comfortable with—monetarily and psychologically. Doing so will lower your premium as much as you feel safe doing, and you’ll know that you can handle the situation if it arises.
Hurricane Deductible FAQs
If I have a percentage deductible, how do I know what my out-of-pocket costs are?
Your insurance policy should include your percentage deductible translated into the dollar amount it equals on your declarations page.
How does a “calendar year hurricane deductible” work?
The term “calendar year hurricane deductible” refers to the rule that you only have to pay the amount of your hurricane deductible once in a calendar year, no matter how many hurricane claims you end up with.
Is it possible to lower my Florida hurricane deductible?
When creating your home insurance policy, you can lower your hurricane deductible by selecting a lower deductible option. However, choosing a lower deductible will raise your premium. If you pick this route, you can sometimes lower your premium by taking measures to protect your home from hurricane damage. For example, with OpenHouse Home Insurance, you can reduce your premium by using hurricane shutters and impact-resistant glass on your doors and windows.