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June 3, 2024

What Are Named Storm Deductibles?

Some insurance policies have a special deductible for losses caused by named storms, like hurricanes. The insurer applies this deductible only when a named storm causes damage. This deductible is separate and different from the normal deductible in a homeowners policy. 

(A deductible is the amount you, the policyholder, owe before your insurance company starts paying its share of the loss.)

Here's what you should know about named storm deductibles. 

How much are named storm deductibles? A named storm deductible is usually a percentage of the home’s value, making a policyholder responsible for a larger portion of a loss compared to their normal homeowners deductible.

 Percentages can range from 1% to 10% of the value of the insured home. For example, if a homeowners policy has a 5% named storm deductible on a $300,000 house the policyholder would be responsible for paying $15,000 out of pocket. Named storm deductibles can also be a fixed dollar amount. 

Read your policy to find out whether the deductible is per event, per season or per calendar year. If multiple named storms cause damage to your home during the coverage period, you may have to pay the deductible more than once. 

Remeber that a higher deductible means a lower premium, but make sure you can afford the deductible if a claim arises.  

How often would I have to pay a named storm deductible? Your deductible for named storms could be per event, per season, or per calendar year. Read your policy or talk to your insurance agent/company to understand which type you have.  

When would I be covered? For the loss to be covered, it must be caused by a named storm. According to the Center for Insurance Policy and Research (CIPR), a hurricane deductible usually applies to damage from a National Weather Service (NWS) or National Hurricane Center (NHC) declared hurricane. Named storm deductibles can also apply to other NWS or NHC weather events, such as typhoons, tropical storms or tropical cyclones.  

Are named storm deductibles common? Nineteen states and the District of Columbia currently have some form of hurricane or named storm deductible in place. These nineteen states are currently Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas and Virginia. Other states may allow insurers to include hurricane deductibles in property insurance policies. Contact your state Department of Insurance with questions about your coverage or deductibles.  

Where did named storm deductibles from from? Named storm deductibles first came about in 1992 after Hurricane Andrew. They became more common after Hurricane Katrina in 2005, when the insurance industry lost $64 billion.  

Why do insurers use named storm deductibles? Hurricane and named storm deductibles allow insurers to provide coverage and manage the cost of premiums. Premiums are the set amount you pay each month to have an insurance policy. 

Source: Hurricane Deductibles, CIPR  

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.