Hurricane and Windstorm Insurance and Risk Management in South Florida
Living in Florida, hurricanes and insurance are two topics that are on the news on a daily basis. Hurricanes and insurance go hand-in-hand. Hurricanes and windstorm related damage accounts for a large amount of the claims expenses which the insurance industry pays out on their policies, and hurricanes are the main concern for many homeowners and business owners when they purchase insurance.
In many insurance policies Hurricanes and Windstorms are defined differently. All hurricanes are windstorms, but not all windstorms are hurricanes. A hurricane is a tropical cyclone which is registered as at least a category 1 on the Saffir Simpson scale. A category one hurricane is defined as having sustained winds between 74-95 mph.
Windstorms include hurricanes, but also include Tropical Depressions, Tropical Storms, Tornadoes, and your run-of-the-mill windy day. Tropical Storms are tropical cyclones with maximum sustained wind speeds between 39 to 73 mph. A Tropical Depression is a tropical cyclone that has maximum sustained winds less than 38 mph.
For insurance these details can cost a lot of money. Most property insurance policies have two separate deductibles in Florida. They have an AOP or All Other Peril deductible; this is the deductible for all covered perils which do not have a specific deductible. For example, this usually is the fire, theft, vandalism, pipe bursting deductible. Then they can have a Hurricane deductible, Named Storm Deductible or a Windstorm Deductible. A hurricane deductible means that if the damage is caused by a storm that is classified as a Category 1 or higher on the Saffir Simpson scale, then no claims will be paid until you reach your deductible. In many cases this deductible is written as a percentage of the total insured value of the property insured. For example, if the home or building is insured for a replacement cost value of $1,000,000, and the Hurricane deductible is 5%, your deductible is $50,000. On the same policy the All other Peril deductible could be only $1,000. So if the storm reaches sustained winds of only 73 mph, and you have damage, you need to pay $1,000 out-of-pocket. If the storm reaches 74 mph, you need to pay $50,000 out-of-pocket. Some policies, like Citizens Property Insurance Corporation’s homeowners insurance policies, have both a Hurricane Deductible and an All other windstorm deductible.
Examples of Hurricane or Windstorm claims include the obvious like roof damage and broken windows, but they also include things such as wind driven rain and power outage, which can get even more complicated. As you may know, Flood Insurance is a completely separate policy from your property or windstorm policy. Flood insurance is insurance provided by independent and captive agents through private carriers, but backed by the Federal Government and FEMA. Wind driven rain however, is not a flood. Storm surge is considered wind driven rain; Rain blown in through a broken window or roof is considered wind driven rain as well. Both of these claims examples would be covered by the windstorm policy, not the Flood Insurance policy. It is very important for property owners to understand what a flood is, and what a flood is not, when speaking with an adjuster. Power outage is another type of peril which can occur due to a storm. Typically damage from power outage is the loss of business income, or spoilage due to the lack of power to run refrigeration equipment. Some policies do not cover power outage at all. Other policies usually place certain limitations on this coverage. For example, they may exclude overhead power lines, or they may only cover power outage when there is direct physical damage to your premises, or direct physical damage to a certain premises.
In Florida, hurricanes are a number one concern in relation to insurance. Understanding your insurance policy for your home and business can save you a lot of money. At ALC Risk Solutions we will analyze your situation and make you a recommendation to satisfy your needs.