HURRICANE DEDUCTIBLES EXPLAINED

Hello, and thank you for reading. This article is designed to give a quick concise explanation of how the different hurricane deductible options work.

Percentage Hurricane Deductible (most common)
First (and I believe the most mis-understood) is the percentage-based hurricane deductible. The most common hurricane deductible for home insurance in Florida is the 2% hurricane deductible. That 2% does not mean 2% of the damage caused by the storm. The 2% stands for 2% of your dwelling coverage (or Coverage A). Simply put if your policy covers your dwelling at an amount of $200,000 your hurricane deductible would be 2% of $200,000 which equates to $4,000.

Flat Hurricane Deductible (less common)
Less common but becoming more popular (especially with the recent hurricane activity in Florida) is the flat hurricane deductible. A flat hurricane deductible is just that, a flat amount (usually $500 or $1000). This is easier to understand because it is just a flat amount.

​Pros and Cons of Percentage Based and Flat Deductibles
Percentage Based Deductible:
Pros

1. Lower rate. The insurance companies give lower rates for those who choose the percentage-based deductibles. (which makes sense since they will pay out less).
2. During the aftermath of a major storm it allows insurance companies to process overall claims quicker since most of the minor damages being reported won’t meet the higher percentage-based deductibles (this is a pro for those who have major damage not so much for those with minor damage)

Cons

1. The obvious, 2% of the value of the home can be a lot of money and can be difficult to come out of pocket (especially after a hurricane).
2. Most people experience minor damage due to a hurricane (which can still be in the thousands) and these repairs often do not meet the percentage based deductible threshold leaving the home owner financially responsible for the repairs.

Flat Deductible:
Pros

1. The obvious, coming out of pocket a lot less to repair damages after a hurricane. The difference between a percentage-based hurricane deductible and a flat one is usually in the thousands. In the example used above the difference between the standard 2% and a flat $1,000 would be $3,000 less out of pocket.  
2. As stated above, most people have minor damages after a hurricane and with a flat deductible you have a much lower threshold to meet before the insurance company will step in financially (helping to cover thousands of dollars of minor damages)

Cons

1. Choosing a flat hurricane deductible does increase the policy premium (though surprisingly not much and in some cases less than a $100).
2.  If everyone chose a flat deductible (which is very unlikely to happen) it would make it more difficult for insurance companies to settle claims quickly since they will have more smaller claims to handle.

I hope this article helps! I tried to keep it as unbiased as possible. If you have any further questions I would recommend you contact your local independent insurance agent, or us :)  for we would be more than happy to help!

About the Author:
Richard Dixon is the owner and operator of Wellcovered Insurance, a local independent insurance agency located in Orange City, Florida.