What is Hurricane Insurance and Do You Need It?

Strictly speaking, there is no such thing as "Hurricane Insurance", rather there are a combination of insurance policies you can purchase to best protect your home from hurricane damage. If you live in a hurricane-prone zone, we recommend you purchase as much coverage as you can afford. As we will discuss in this article, a hurricane can cause devastating damage, and a standard home insurance policy won't always cover it.

Hurricane Wind Damage Covered by Homeowners Insurance

A home insurance policy is the first way to protect your home against a hurricane, and may be supplemented by windstorm insurance (if available in your state), or flood insurance. The standard home policy guards your home from damage caused by heavy winds. If the heavy winds of a hurricane rip off your siding, shingles, etc., your policy would reimburse you for those damages. Often times, your policy will also have a hurricane deductible (more below).

Coverage for Wind Damage: Windstorm Insurance

In some states like Louisiana, Texas and Florida, some companies may require you to buy an extra windstorm insurance policy in addition to your normal home insurance policy. In this case all wind damage would fall under this policy instead of your traditional homeowners. On top of hurricane coverage, you'd also be covered for tornadoes, cyclones and all high-speed wind damage. You will need to talk to your insurer to see if you need the separate windstorm policy.

Hurricane Deductibles

Another thing to consider is a hurricane deductible. In 19 states in certain high risk areas before you can get reimbursed for a claim stemming from hurricane damage you may need to pay a hurricane deductible that's different from your normal deductible. The hurricane deductible is typically between 2% to 5% of what your home is insured for. For example, if your home is insured for $500,000, then you could be on the hook for the first damages of up to $15,000 to $25,000 for the deductible. However, hurricane deductibles aren't always percentage-based; in Florida, for example, you must be given the option of a $500 flat-rate hurricane deductible, although your premium may of course be higher than if you choose one of the other required options: of 2%, 5%, or 10% of the insured value of your home.

Usually for the deductible to be triggered the storm has to be a named hurricane, along with meeting certain other conditions like it reaching land. You will need to figure it out with your insurance company after the fact to determine whether you would need to pay for the hurricane deductible. You should just be wary that you may need to pay several thousands of dollars out of pocket for your home to be repaired after a hurricane. We would recommend if your home is insured for a high value and are worried about a hurricane, you keep the funds for the deductible readily available.

Hurricanes & Water Damage are Covered by Flood Insurance

The second half of "hurricane insurance" is a flood insurance policy. Flood insurance covers one thing, and that is the damage to your home and your possessions caused by an external flood. If a hurricane causes rising flood waters and the water enters your home, you would be covered if you have a policy. Flood damage is particularly costly--just one inch of flood water can cause on average $10,000 worth of damage with the average flood insurance claim costing $30,000.

Sometimes you will be required to have a flood insurance policy if you live in a particularly risky area and you are financing your home. For everyone else, the easiest way to determine whether you're in danger of flood is by looking at your community's flood map. There are several thousand communities across the country that participate in FEMA's flood mapping program, and if you are wondering if you are in a flood zone, your community likely has a map.

These maps are broken down into several "risk" categories. If you live in a "X" or "A" designated zone, your home is at the highest risk for flooding, thus we would recommend you have a flood insurance policy. If you are in a "B","C", or "X" zone, you live in a more moderate zone. Be aware though that about 25% of all flood insurance claims come from these zones. If a hurricane is likely to hit your area sometime in the next few years and you live in a moderate zone, we would also recommend a flood insurance policy.

If you live in an area that has little chance of being flooded by a hurricane, then you can probably forgo the flood policy.

Why You Need Both Home and Flood Insurance for a Hurricane

Whether you have just a homeowners polices, or both a home and windstorm policy, the coverage is not enough because when a hurricane hits, it's bringing wind and water and you are only covered for wind. Dealing with the insurance company can become a major hassle if the cause of the damage--wind or water--is ambivalent. To avoid that situation, its important to also have a good flood insurance policy.

In one case recently, a home crashed into a neighboring home--destroying it--during Superstorm Sandy. The owners of the destroyed home contended that it was wind that blew the neighbor's home into theirs, while the insurer argued it was actually water. Eventually it was deemed to be cause from water, so the homeowners ended up getting no money for their damages. This is where flood insurance would step in.

How Much Does Hurricane Insurance Cost?

The average cost of homeowners insurance is about $964 per year while the average cost of flood insurance is $672 per year, meaning on average our sample homeowners would pay $1,646 to protect their home from a hurricane. If you need to pay for the extra windstorm coverage, it may cost several hundred dollars extra. How much you ultimately pay though depends on the value of your home, as well as its proximity to a body of water.

If you live in a high-risk flood area, you may end up spending several thousand dollars on your flood insurance--something to consider before buying a home so close to water. Very valuable homes will also have more expensive home insurance policies which can also cost several thousand dollars. Just remember though, the more valuable the home, the more you have to lose should a hurricane wreak havoc.

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