Background on: Hurricane and windstorm deductibles

The Topic

After Hurricane Andrew in 1992, insurers realized that losses from hurricanes could be much higher than they had previously thought. Hurricane Katrina, in 2005, which cost insurers more than $41 billion at the time, confirmed their fears. After these extraordinary losses, reinsurance companies, insurers that share the cost of claims with primary companies, such as homeowners insurers, said that they could not assume so much risk and that primary companies must reduce their potential losses.

During the Atlantic hurricane season, which lasts from June to November, every coastal state from Florida to Maine could potentially be hit by a storm. Increasing development along the coastal areas of these states has put more and more homes at risk of severe windstorm damage. To limit their exposure to catastrophic losses from natural disasters, insurers in these states sell homeowners insurance policies with percentage deductibles for storm damage instead of the traditional dollar deductibles, which are used for other types of losses such as fire damage and theft. With a policy that has a $500 standard deductible, for example, the policyholder must pay the first $500 of the claim out of pocket. But percentage deductibles are based on the home's insured value. So if a house is insured for $300,000 and has a 5 percent deductible, the first $15,000 of a claim must be paid out of the policyholder’s pocket. The details of hurricane deductibles are spelled out on the declarations page of homeowners policies.

To some degree, depending on the state, insurance companies determine the level of the hurricane or windstorm or wind/hail deductible and where it should apply, except in Florida where state law dictates these variables. Insurers' hurricane deductible plans must be reviewed by the individual state insurance department where they may be subject to various regulations and laws.

Nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington DC. Listed below are reports for these states detailing hurricane deductibles.

Explanation of Terms:

• Beach Plan, FAIR (Fair Access to Insurance Requirements) Plan; and other involuntary or residual markets: insurers of last resort, state-run pools that provide insurance to people who are unable to obtain insurance in the voluntary market. Beach Plans operate in specific coastal territories, defined by zip codes, counties or geography; FAIR Plans are generally statewide.
• Deductible: amount of loss paid by the policyholder before insurance kicks in.
• Dollar deductibles: a flat dollar amount.
• Mandatory deductibles: may be set by insurance rules, regulations or state law, or by an insurer.
• Market Assistance Plan (MAP): a voluntary clearinghouse and referral system designed to put people looking for insurance in touch with insurance companies that have agreed to take on more business.
• Optional deductibles: mostly used in less vulnerable areas. Policyholders may opt for these higher deductibles in order to pay a lower premium.
• Percentage deductibles: calculated as a specified percentage, for example 2 percent, of the insured value of the property.
• Standard deductibles: an indication of the usual homeowners insurance deductibles in the state or area.
• Trigger: an event that is needed for a hurricane deductible to be applied. Hurricane deductibles are “triggered” only when there is a hurricane, or a tropical storm. Triggers vary by state and insurer and may apply when the National Weather Service (NWS) "names" a tropical storm, declares a hurricane watch or warning or defines the hurricane's intensity. Triggers generally include a timing factor, i.e., damage occurring within 24 hours before the storm is named or a hurricane makes landfall up to as long as 72 hours after the hurricane is downgraded to a lesser storm or a hurricane watch cancelled.

How Hurricane Deductibles Work

There are two kinds of wind damage deductibles: hurricane deductibles, which apply to damage solely from hurricanes, and windstorm or wind/hail deductibles, which apply to any kind of wind damage. Percentage deductibles typically vary from 1 percent of a home's insured value to 5 percent. In some coastal areas with high wind risk, hurricane deductibles may be higher. The amount that the homeowner will pay depends on the home's insured value and the "trigger" selected by the insurance company, which determines under what circumstances the deductible applies. In some states, policyholders may have the option of paying a higher premium in return for a traditional dollar deductible, depending on how close to the shore they live. In some high-risk coastal areas, insurers may not give policyholders this option, making the percentage deductible mandatory. (See Infographic: Hurricane Deductibles.)

Hurricane and Windstorm Deductibles by State

State regulations change periodically; please reference the state-specific links provided for the latest information.

Alabama Hurricane Deductibles

State law mandates that insurers offer discounts to policyholders who strengthen their homes against wind damage.  See Department of Insurance website for details.

The Alabama Insurance Underwriting Association (Beach Plan) provides two types of policies: fire and extended coverage (not as comprehensive as standard homeowners policies and provides no liability coverage); and a wind and hail only policy for homes, condominiums, mobile homes and commercial businesses located in the Beach, Seacoast and Gulf Front territories of Baldwin and Mobile Counties. The plan offers discounts on policies covering residential dwellings built to, or retrofitted to fortified wind resistive standards, as certified by the IBHS. See website for details.

Information Sources:

• Alabama Insurance Underwriting Association
• Alabama Department of Insurance

Connecticut Hurricane Deductibles

The trigger for hurricane deductibles, or the point at which they apply, is by law when the National Weather Service (NWS) declares a hurricane that records winds of 74 miles per hour or more anywhere in Connecticut. The hurricane deductible is in effect until 24 hours following termination of the last hurricane warning issued for any part of Connecticut by the NWS; or 24 hours after the hurricane is downgraded from a hurricane by the NWS for any part of Connecticut.

The insurance department allows companies to apply an actuarially justified hurricane deductible based on a property’s distance from the ocean. The insurance department has guidelines for storm shutter requirements.

The Connecticut FAIR Plan insures homeowners who have not been able to find coverage elsewhere. Provides actual cash value coverage for a very basic “named perils” policy. Dwellings located within 2,600 feet of the shoreline will have two deductibles—one deductible for named perils and a separate hurricane deductible of 5 percent. See website for details.

The Coastal Market Assistance Program (C-MAP) assists homeowners living in Connecticut coastal areas who have been unable to obtain insurance. C-MAP was created by the insurance companies that write homeowners insurance in Connecticut under the authorization of the Connecticut Insurance Department and is administered by the Connecticut FAIR Plan.

Information Sources:

• Connecticut Insurance Department
• Connecticut Fair Plan
• CMAP

Delaware Hurricane Deductibles

Insurers are required to provide clear and prominent notice concerning all hurricane and wind/hail deductibles and must include information on the trigger, how the deductible is applied and if it is stated as a percentage or dollar amount. In the case of percentage deductibles, the policy must provide an example of how it works.

Insurance Placement Facility of Delaware: The facility insures homeowners who have not been able to find coverage elsewhere for windstorm and hail damage. The FAIR Plan uses a $2,000 hurricane deductible that is mandatory in certain zip codes along the coast and optional in other zip codes.  The deductible is triggered when the National Hurricane Center of the National Weather Service declares a hurricane watch or warning for any part of the state and ends 72 hours after the National Weather Service terminates the last hurricane watch or warning for any part of the state. See website for details.

Information Sources:

• Delaware Insurance Department
• Insurance Placement Facility of Delaware

District Of Columbia Hurricane Deductibles

The District of Columbia Property Insurance Facility (FAIR Plan) insures homeowners who have not been able to find coverage elsewhere. See website for details.

Information Sources:

• District of Columbia Department of Insurance, Securities and Banking
• District of Columbia Property Insurance Facility (FAIR Plan)

Florida Hurricane Deductibles

By Florida statute, the application of hurricane deductibles is triggered by windstorm losses resulting only from a hurricane declared by National Weather Service. Hurricane deductibles apply for damage that occurs from the time a hurricane watch or warning is issued for any part of Florida, up to 72 hours after such a watch or warning ends and anytime hurricane conditions exist throughout the state.

Hurricane deductibles and their triggers are set by law and are the same for the private, or regular market, as well as Florida’s Citizens Property Insurance Corporation (CPIC), the state-run program which provides property insurance to consumers. The hurricane deductible applies only once during a hurricane season. All insurers must offer a hurricane deductible of $500, 2 percent, 5 percent and 10 percent of the policy dwelling or structure limits. The percentages are based on the total value of the home. By Florida law, property insurance rate filings must include mitigation discounts or credits.  These are applied to property insurance premiums. These discounts are available for personal and commercial residential property only. See Florida Office of Insurance Regulation for details.

The CPIC (Citizens), Florida's state-run insurer of last resort will insure new homeowners in high-risk areas and others who cannot find coverage in the open private market. Under Florida law, Citizens may write a new insurance policy only if no comparable private market coverage is available or comparable private market policy premiums are more than 15 percent higher than a comparable Citizens policy See website for details.

The Florida Market Assistance Program is a free referral service designed to match consumers who cannot find property insurance with Florida-licensed agents and insurers who are writing new business. See website for details.

Information Sources:

• The Florida Insurance Council
• Florida Office of Insurance Regulation
• Citizens Property Insurance Corporation
• Florida Market Assistance Plan

Georgia Hurricane Deductibles

The Georgia Insurance Underwriting Association (FAIR Plan) insures those who have not been able to find coverage elsewhere for windstorm and hail damage only for homes and businesses on the offshore islands and in certain counties, and wind and hail and other perils in the remainder of the state. See website for details.

Information Sources:

• Georgia Department of Insurance
• Georgia Underwriting Association

Hawaii Hurricane Deductibles

Most homeowners insurers provide property coverage for all perils and liability but exclude hurricane insurance.  Homeowners must purchase hurricane insurance separately from specialized companies.

Information Sources:

• Hawaii Department of Commerce and Consumer Affairs, Insurance Division
• A Consumer’s Guide to Homeowners Insurance in the State of Hawaii

Louisiana Hurricane Deductibles

There are three deductibles for homeowners policies related to wind damage: hurricane, named storm and windstorm and hail.  Named storm deductibles are activated when the National Hurricane Center reports that a storm reached tropical storm strength when winds reach 39 miles per hour (mph).  Hurricane deductibles are activated when the National Hurricane Center reports that a tropical storm reached hurricane strength, at 74 mph.  Windstorm and hail deductibles are used when homes sustain damage from winds from any source: hurricanes and tropical storms, tornadoes, or other storms.

Insurers generally cannot increase the named storm or hurricane deductible on homeowners insurance policies that have been in effect for more than three years. Insurers cannot impose more than one named storm or hurricane deductible per hurricane season. See Advisory Letter 2018.01 for information on separate named storm/hurricane deductibles.

State regulations mandate that homeowners may be eligible for premium discounts if they build or retrofit their home to comply with the state’s construction code or install mitigation or retrofitting improvements that are known to reduce loss from a windstorm or hurricane.

Insurers of commercial property cannot charge multiple hurricane deductibles to the property owner in the same hurricane season. The statute (LA ST s 22:1267.1) goes into effect August 1, 2021 and details other rules relating to named storm and hurricane deductibles.

Most homeowners coverage in coastal areas is underwritten by the Louisiana Citizens Property Insurance Corporation.

The Louisiana Citizens Property Insurance Corporation provides insurance for residential and commercial property for those who cannot obtain it in the voluntary market. The Louisiana Citizens FAIR Plan and the Louisiana Citizens Coastal Plan operate as programs of the Louisiana Citizens Property Insurance Corporation. Both offer wind and hail only policies. See website for details.

Information Sources:

• Louisiana Citizens Property Insurance Corporation
• Louisiana Department of Insurance
• American Property Casualty Insurance Association

Maine Hurricane Deductibles

According to the Maine Bureau of Insurance, a hurricane deductible may be applied only during the period that starts when the National Weather Service issues a hurricane warning for a forecast zone that includes any part of the municipality in which the insured property is located and ends 24 hours after the National Weather Service terminates the last hurricane warning for that forecast zone.

Information Source:

• Maine Bureau of Insurance

Maryland Hurricane Deductibles

Maryland law allows a hurricane deductible to be applied to the entire state if there is a hurricane warning in any part of the state.  Hurricane or other windstorm deductibles can exceed 5 percent of the coverage limit without the approval of the Maryland Insurance Administration. The insurer must file any underwriting standard that contains a deductible over 5 percent.  Insurers are required by law to offer a premium discount to homeowners who submit proof to their insurer that they have made qualified mitigation repairs or improvements that materially mitigate loss from wind and have had these improvements inspected by a licensed contractor. The improvements are subject to inspection and verification by the insurer. See website for details.

The Maryland Joint Insurance Association insures homeowners and businesses who have not been able to find coverage elsewhere. Seasonal property and mobile homes are not eligible. Windstorm or hail deductibles apply to property within 200 feet of water. See website for details.

Information Sources:

• Maryland Insurance Administration
• Maryland Joint Insurance Association

Massachusetts Hurricane Deductibles

The Massachusetts Property Insurance Underwriting Association (FAIR Plan) insures properties where the homeowner or business has not been able to find coverage elsewhere. The plan uses a windstorm/hail deductible for any type of wind damage. See website for details.

Information Sources:

• Massachusetts Division of Insurance
• Massachusetts Property Insurance Underwriting Association

Mississippi Hurricane Deductibles

In Mississippi percentage storm deductibles can be named storm deductibles or hurricane deductibles. In both cases the deductible applies beginning when a named storm or hurricane watch or warning is issued anywhere in the state by the National Hurricane Center of the National Weather Service and ending 24 hours after the last named storm or hurricane watch or warning is issued for any part of the state. Insurers that use named storm or hurricane deductibles must clearly state on the homeowners policy the timing for the deductible and offer a practical example of how the deductible works.

Mississippi Windstorm Underwriting Association (MWUA, Wind Pool): MWUA provides windstorm and hail coverage only in the coastal counties of George, Hancock, Harrison, Jackson, Pearl River and Stone. See website for details.

Mississippi Residential Property Insurance Underwriting Association (MRPIUA): Insures owners of one- and two-family dwellings in the state who have not been able to find coverage elsewhere for windstorm, hail and fire and extended coverage. See website for details.

Information Sources:

• Mississippi Windstorm Underwriting Association
• Mississippi Residential Property Insurance Underwriting Association
• Mississippi Department of Insurance

New Jersey Hurricane Deductibles

In New Jersey, hurricane deductibles approved by the Department of Banking and Insurance apply to losses from a storm designated a hurricane by the National Weather Service (NWS) but only if sustained winds speeds of 74 mph have been measured somewhere in the state. According to the Department of Banking and Insurance, the duration of a hurricane includes the time period beginning 12 hours prior to the first time sustained hurricane force winds of 74 miles per hour or greater are measured in New Jersey by the NWS (regardless of whether the sustained hurricane force winds reach the risk insured under the policy) continuing for the time period during which hurricane conditions exist anywhere in New Jersey and ending 12 hours after the last time hurricane force winds of 74 miles per hour or greater are measured in the state by the NWS. See website for details.

The New Jersey Insurance Underwriting Association (FAIR Plan): Insures one- to four-family homes where the owner has not been able to find coverage elsewhere. Coverage is limited, but perils include wind. In certain coastal areas, a special hurricane deductible may apply.Hurricane deductibles apply to losses from a storm designated a hurricane by the National Weather Service, with sustained winds speeds of 74 mph anywhere in the state, beginning 12 hours before the 74 mph winds begin and ending 12 hours after the last measurement of 74 mph winds is made. Homes that have certain wind-resistant features are eligible for a hurricane deductible reduction if they are properly documented. See state FAIR Plan website for details.

Information Sources:

• New Jersey Department of Banking and Insurance
• FAIR Plan: New Jersey Insurance Underwriting Association

New York Hurricane Deductibles

According to the New York State Insurance Department, the mandatory deductibles which are shown on the policy’s declarations page commonly range from 1 percent to 5 percent of the insured amount. The event which triggers the deductible varies among insurers. Some use a category 1 as the trigger, while others use category 2. In any event, the hurricane would have to be designated by either the National Weather Service or the National Hurricane Center. Hurricane deductibles by company can be viewed on the New York State Department of Financial Services Website.

Insurers are required by law to offer discounts to any homeowner who has installed hurricane/storm shutters or hurricane-resistant laminated glass windows and doors.

The New York Property Insurance Underwriting Association (FAIR Plan) insures residential and commercial properties in the state where the homeowner cannot find coverage elsewhere. "Extended coverage" includes windstorm coverage. The Coastal Market Assistance Plan (C-MAP) assists policyholders living on the south shore of Long Island, Brooklyn, Queens, Staten Island, and Long Island’s forks that are within 1 mile of the shore and property on the north shore of Long Island, in the Bronx and Westchester within 2,500 feet of the shore locate an insurer willing to provide homeowners coverage. See website for details.

Information Sources:

• New York State Department of Financial Services
• New York Property Insurance Underwriting Association
•  Coastal Market Assistance Plan

North Carolina Hurricane Deductibles

The North Carolina Joint Underwriting Association (FAIR Plan) insures residential and commercial properties statewide where the homeowner has not been able to find property coverage elsewhere. The Coastal Property Insurance Pool (CPIP), offers commercial, homeowner and dwelling windstorm coverage and homeowner coverage in the 18 eligible coastal counties of North Carolina.

Information Sources:

• North Carolina Department of Insurance
• North Carolina Joint Underwriting Association (FAIR Plan)
• Coastal Property Insurance Pool

Pennsylvania Hurricane Deductibles

According to the Department of Insurance, some homeowners insurance policies for properties located in the state have special hurricane, tropical storm or named storm deductibles based on a percentage of a property’s insured value. These deductibles typically range from 1 percent of a home’s insured value to 5 percent.

The Pennsylvania FAIR Plan, formally known as the Insurance Placement Facility of Pennsylvania, makes basic property insurance available to persons who have been unable to secure such insurance from the voluntary insurance market. Windstorm coverage is available from the Facility under Extended Property Insurance Coverage

Information Sources:

Pennsylvania Insurance Department

Insurance Placement Facility of Pennsylvania

Rhode Island Hurricane Deductibles

Insurers in Rhode Island may apply a hurricane deductible on homeowners policies of no more than 5 percent of a home’s insured value. Windstorm deductibles may not be used. (Windstorm deductibles apply to damage from any kind of wind, not solely from hurricanes.) Insurers may offer a flat dollar deductible instead of or in addition to a percentage deductible but the total deductible may not exceed 5 percent of the insured value of the property. Premium credits, or discounts, must be provided if policies have hurricane deductibles. The deductible will only be in effect when the National Weather Service issues a hurricane warning for the applicable parts of Rhode Island and will remain in effect for 24 hours after the last warning. According to the Department of Insurance, for Block Island a loss is due to a hurricane when there are hurricane force sustained winds as defined by the National Weather Service. For the remainder of the state, a loss is due to a hurricane when there are hurricane force sustained winds anywhere in the state other than Block Island, as reported by the National Weather Service. If a policyholder experiences a loss from more than one hurricane in a calendar year, the insurer can apply the hurricane deductible only once. Insurers are required to post a notice containing all details pertaining to hurricane deductibles on the homeowners policy, including at least two practical examples of how they work.

Mitigation: Insurers can require mitigation measures only in certain specified zones and must waive the hurricane deductible if the policyholder implements approved mitigation measures. See Rhode Island Department of Insurance regulations.

Rhode Island Joint Reinsurance Association: Insures homeowners and commercial property owners who have not been able to find coverage in the voluntary market. Hurricane deductibles are mandatory and deductibles may not exceed 5 percent and will vary by territory and by the Rhode Island Building Code Wind Zone. Mitigation measures will eliminate or reduce the hurricane deductibles and will also provide for premium relief.

Information Sources:

• Rhode Island Department of Business Regulations
• Rhode Island Joint Reinsurance Association

South Carolina Hurricane Deductibles

Insurers in South Carolina are required to notify residential property insurance policyholders if the policy contains a separate deductible for hurricane, named storm or wind/hail damage. If it is included, the insurer must provide an example to show how the deductible functions for a policy valued at $100,000. The insurer must also include a clear explanation of the event that will trigger the deductible.

The South Carolina Wind and Hail Underwriting Association (Wind Pool) insures properties where the homeowner has not been able to find coverage elsewhere for windstorm and hail damage from any type of windstorm. The Wind Pool operates in certain coastal areas. See website for details.

Information Sources:

• South Carolina Department of Insurance
• South Carolina Wind and Hail Underwriting Association

Texas Hurricane Deductibles

Under Texas law, the windstorm deductible applies to windstorm and hail damage from any type of wind storm, not only named storms or hurricanes.

The Texas Windstorm Insurance Association (TWIA) provides adequate wind and hail coverage when it is not available in the insurance marketplace for 14 counties.

The Texas Fair Access to Insurance Requirements Plan Association (FAIR Plan) provides residential property insurance to qualified homeowners who cannot obtain insurance from licensed insurance companies. The FAIR plan operates statewide but cannot provide wind and hail coverage in areas that are eligible for inclusion in the TWIA (The TWIA covers only 14 coastal counties and five communities in Harris County [Galveston Bay].) Helpinsure.com, administered by the Texas Department of Insurance has several resources available to help coastal residents find wind and hail insurance coverage. It includes a Coastal Insurance Resource page with information about wind and hail coverage and companies that are providing the coverage in coastal areas.

Information Sources:

• Texas Department of Insurance
• Texas Windstorm Insurance Association
• Texas FAIR Plan Association
• Helpinsure.com

Virginia Hurricane Deductibles

The Virginia Property Insurance Association (FAIR Plan) provides dwelling and commercial property coverage to individuals and businesses throughout the state that are unable to obtain coverage through the voluntary insurance market.

Information Sources:

• Virginia Bureau of Insurance
• Virginia Property Insurance Association

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