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Hurricane deductibles and insured losses

Posted On Thu, November 29, 2012

Following the damage of Hurricane Sandy, governors of many eastern states ordered insurance providers to waive hurricane deductibles in an effort to ease the burden on families. However, they may have inadvertently increased the insured losses from the storm to such an extent that policyholders may feel the effects in the future.

When deductibles are waived, it puts the pressure of the entire cost of the damage repair onto homeowners' insurance providers. According to Insurance Journal, in removing the wind deductible payments for policyholders, the governors increased the pressure on insurers by approximately 5 percent per customer.

When consumers purchase an insurance policy with a deductible, they are agreeing to pay a small portion of the cost of the repair to their homes before their insurance company comes in to pay the rest. In some cases, the deductible amounts to a percentage of the damage, in others, it's a set amount.

When the deductibles are removed, the full cost of the repairs rests with the insurers, which, according to Insurance Journal, increases the insured losses. Although insurers have not stated that they will increase homeowners insurance rates in 2013, if governors continue to waive deductibles, they may be forced to take action in the future.

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