How Hurricane Deductibles Work

In Rhode Island, hurricane deductibles on homeowners policies may be no more than 5% of a home’s insured value. Some policies may offer a flat dollar deductible, but it may not exceed 5% of the insured value of the property. The deductible goes into effect when “triggered” by a hurricane warning from the National Weather Service (NWS) for the applicable parts of Rhode Island and remains in effect for 24 hours after the last warning. 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 NWS. 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.

Glossary of Terms:

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.

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.

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.

Sources: Insurance Information Institute, RI Department of Business Regulations

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Hurricane Deductible Infographic

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