What Is Hurricane Insurance?

What Is Hurricane Insurance?

Let me tell you straight up: hurricane insurance isn't a standalone policy you can buy separately. When people talk about it, they're usually referring to a hurricane deductible that's part of your homeowners insurance. This is the amount you pay out of pocket before your insurer steps in to cover damage from a hurricane. It's calculated as a percentage of your property's value, and you'll find this in 19 states prone to hurricanes, plus the District of Columbia.

Sometimes, the term points to specific catastrophe insurance that handles flooding or extreme winds, which is often mandatory in high-risk areas like Florida and Texas.

Key Takeaways

Strictly speaking, there's no such thing as hurricane insurance on its own. Instead, you get coverage for the damaging winds or waters from hurricanes through flood insurance or windstorm insurance. In coastal states, many homeowners policies include a hurricane deductible, meaning you pay an extra amount before your coverage activates.

Understanding Hurricane Insurance

Hurricane deductibles stand apart from your regular homeowners insurance deductibles. While a standard one might be a fixed amount like $500 or $2,000, a hurricane deductible is a percentage of your home's value—say, 2% to 5%, which could mean $2,000 to $5,000 for every $100,000 of coverage.

These deductibles started after Hurricane Andrew in 1992 caused huge losses for insurers in Florida, and they spread widely after Hurricane Katrina in 2005. Insurers rely on reinsurers for big claim payouts, but even those struggled, leading to hurricane deductibles in 19 states and D.C. These are all Gulf or Atlantic Coast areas vulnerable to hurricanes.

You typically pay this deductible if a named hurricane hits your area, or sometimes a severe tropical storm. It applies to damage until the storm is downgraded, but rules differ by state. Even without a hurricane deductible, a windstorm deductible might kick in for any high-wind damage, often at 1% of the property's value or slightly lower.

Policies Offering Hurricane Coverage

Be aware that even with a hurricane deductible, your coverage might have gaps. Standard homeowners policies don't cover flooding from external events like hurricanes, so you need separate flood insurance for that. Most policies do cover some hurricane wind damage, like shingles torn off or a tree branch breaking a window.

In some hurricane-prone states, homeowners insurance won't cover wind damage at all, so you have to buy separate windstorm insurance. This would handle all wind-related issues, including from tornadoes or cyclones, instead of your main policy.

How Hurricane Deductibles Are Calculated

Insurers set the hurricane deductible level, but it's regulated by the state. For instance, Rhode Island caps them at 5% for hurricanes and windstorms. In Florida, you must have the option for a $500 flat-rate deductible, though premiums might be higher compared to 2%, 5%, or 10% options.

In some states, you can lower your premiums by fortifying your home against hurricanes, like adding storm shutters or hurricane-resistant windows and doors.

Are Wind and Hurricane Insurance the Same?

Windstorm insurance differs from what people call hurricane insurance. It covers only wind damage, while hurricane insurance often means a mix of windstorm, flood, and homeowners policies.

Is Hurricane Insurance the Same as Flood Insurance?

They're not identical. Flood insurance covers flooding from various sources, including hurricanes or even a burst pipe. Hurricane insurance typically combines flood and windstorm coverage for hurricane-specific damages like high winds.

Are Hurricanes Usually Part of Homeowners Insurance?

You might need separate flood and windstorm insurance for full hurricane protection, as they're not always included in homeowners policies. Some policies cover windstorms, but most exclude floods.

The Bottom Line

Hurricane insurance can shield you from financial ruin if a storm damages your home. Whether it's right for you depends on your hurricane risk and finances. I suggest talking to a financial advisor for advice tailored to you.