Powerful Hurricane Dennis Threatens Gulf Coast States -- Review Your Insurance Policy To See What Coverage And Deductibles You Have

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NEW YORK, July 8 - The first hurricane of the 2005 season, Dennis, poses a threat to the Gulf Coast states of Florida, Alabama, Mississippi and Louisiana. The Insurance Information Institute (I.I.I.) suggests that all homeowners review their insurance policy to see what coverages and deductibles apply.

A standard homeowner policy deductible is usually $500 or $1,000. However, if a storm is severe, a windstorm deductible may apply. Deductibles may range from one to 15 percent of the replacement cost of rebuilding a home, depending on many factors that differ from state to state, and sometimes from insurer to insurer.

These factors include the home's insured value and the "trigger" - how strong the hurricane would have to be for the hurricane deductible to go into effect. For example, a two percent deductible on a home with an insured value of $100,000 would be $2,000.

Insurers in 17 hurricane-vulnerable states may now use percentage deductibles on homeowners insurance policies as opposed to a dollar deductible, to limit their exposure to catastrophic losses from natural disasters. Percentage deductibles are sometimes mandatory and may apply to an entire state or just part of it.

More than 68 million people now live in hurricane-vulnerable coastal areas of the United States, up from 52 million in 1970; a 31 percent increase over 30 years. Homes and commercial structures now have an insured property valued at more than $2 trillion, noted the I.I.I.

Because of the greater buildup along coastal areas and increasing construction costs, the cost of repairing and replacing structures due to natural disasters has increased dramatically over the last decade. Since 1990, insurers have paid out more than $100 billion in catastrophe-related losses - or about $700 million per month (1). The term "catastrophe" in the insurance industry denotes an event that causes more than $25 million in insured damage. Included are such well-known events such as last year's quartet of hurricanes and the Northridge earthquake, and also many smaller disasters associated with tropical storms, tornados, wildfires, hail, ice and snow.

"In the face of increased development along the coast, hurricane deductibles are a way of dealing with this risk but keeping insurance available and affordable," says I.I.I.'s consumer spokesperson, Jeanne M. Salvatore.

Other Things to Consider

Hurricanes can cause major floods. While standard homeowners, renters and business insurance policies cover wind and rain damage from hurricanes, they do not cover flooding, according to the I.I.I. Flood insurance is available through the National Flood Insurance Program (NFIP), a division of the Federal Emergency Management Agency. Flood insurance for homes or small businesses can be purchased directly from the federal government or through insurance companies or agents.

The "comprehensive" portion of automobile insurance policies covers losses due to flooding, but not all drivers purchase comprehensive coverage. People often buy comprehensive coverage to protect cars when they are new but drop it as their market value declines.

To learn more about how to insure against a hurricane, contact your insurance agent or company representative. More information on wind and hurricane deductibles along with home insurance information can be found on the I.I.I.'s website, www.iii.org.

(1) Excludes the impact of the September 11, 2001 terrorist attack.