Filed Under:Agent Broker, Coverage Issues

Hurricane deductibles: How much do homeowners know?

Survey finds coastal homeowners don’t know much about hurricane deductibles.

This Oct. 7, 2016 satellite image shows Hurricane Matthew. A new study finds that homeowners in states susceptible to storms like Matthew don't know much about hurricane deductibles. (NOAA via AP)
This Oct. 7, 2016 satellite image shows Hurricane Matthew. A new study finds that homeowners in states susceptible to storms like Matthew don't know much about hurricane deductibles. (NOAA via AP)

Despite living in areas susceptible to hurricanes, one third of homeowners in several coastal states don't know what hurricane deductibles are and how they work.

Related: Closing the protection gap with parametric hurricane insurance in the U.S.

According to a new study from the Insurance Research Council (IRC) titled “Public Understanding of Hurricane Deductibles, Need for Consumer Education Persists,” 34% of homeowners polled in New Jersey, North Carolina, South Carolina, Florida and Texas said they had never heard of hurricane deductibles or were not sure what they were, and 26% admitted they lacked an understanding of deductibles in general (see graphs below).

(Click images to enlarge.)

Related: Unusually active hurricane season has Gulf of Mexico in sights

Do homeowners know how their deductibles work?


A hurricane deductible is a higher deductible found in homeowners’ insurance policies that applies when a hurricane occurs. These deductibles, which became more common after insurers suffered heavy losses from Hurricane Andrew in 1992, are often calculated as a percentage of the insured value of a home, another concept the IRC survey found unfamiliar to homeowners.

Related: Update on homeowners' insurance market

One in three respondents with percentage-based hurricane deductibles did not know or were unsure of the percentage applicable to their deductible, and four in 10 did not understand the basis for calculating the deductible. One in four respondents incorrectly thought the percentage was applied to the total amount of their claim (see graphs below).

(Click images to enlarge.)

The degree of hurricane deductible understanding — or the lack of it, really — wasn’t consistent across the board, however. The survey found that the level of understanding varied across the five states. New Jersey respondents demonstrated the lowest level of awareness and understanding of several hurricane deductible issues, despite the fact that about 346,000 homes in New Jersey were damaged or destroyed by Superstorm Sandy in 2012.

Related: N.Y. real estate management firm denied $3M in Sandy insurance coverage

The report is based on an online survey conducted by GfK Public Affairs & Corporate Communications of 1,047 homeowners — 200 or more in each of the five states studied. Only homeowners living in selected counties where the home involved was their primary residence and with insurance coverage purchased exclusively from private insurance companies were included.

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