̽»¨¾«Ñ¡

Check Your Coverages and Deductibles, Advises the I.I.I.

INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org
Washington, D.C.: 202-833-1580

NEW YORK, August 20, 2007 - Although the path of Hurricane Dean is still uncertain, the ̽»¨¾«Ñ¡ Information Institute (I.I.I.) suggests that home and business owners review their insurance policies now to see what coverages and deductibles apply to damage from hurricanes and windstorm.

A standard homeowners policy deductible is usually $500 or $1,000. However, if a storm is severe, a windstorm or hurricane deductible may apply. Deductibles typically range from 1 to 5 percent of the replacement cost of rebuilding a home, but may be as high as 25 percent. The choice of a higher deductible is usually at the discretion of the policyholder. The deductible depends on many factors that differ from state to state, and sometimes from insurer to insurer. These factors include the home's proximity to the shore, its insured value and the "trigger"-how strong the hurricane must be for the hurricane deductible to go into effect. For example, a 2 percent deductible on a home with an insured value of $100,000 would be $2,000.

Triggers vary by state and insurer and may apply when the National Weather Service (NWS) "names" a tropical storm, declares a hurricane watch or warning, or defines the hurricane's intensity. Triggers generally include a timing factor, such as damage occurring within 24 hours before the storm is named or a hurricane makes landfall up to as long as 72 hours after the hurricane is downgraded to a lesser storm or a hurricane watch cancelled. Read your policy carefully and make sure you understand what your trigger for a windstorm or hurricane deductible is. If you are uncertain, speak to your insurance agent or company representative.

Insurers in 18 hurricane-vulnerable states now use percentage deductibles on homeowners insurance policies as opposed to a dollar deductible, to limit their exposure to catastrophic losses from natural disasters. Percentage deductibles are sometimes mandatory and may apply to an entire state or just part of it. In some states or portions of a state, policyholders have a "buy back" option-paying a higher premium in return for a traditional dollar, rather than a percentage, deductible.

In the United States special pools, known as Beach and Windstorm Plans, ensure the availability of windstorm insurance for properties close to the ocean. These pools, which exist in seven states along the Gulf and Atlantic coasts in various forms, are operated by property insurers doing business in the state, and in some cases by the state itself.

More than 68 million people now live in hurricane-vulnerable coastal areas of the United States, up from 52 million in 1970; a 31 percent increase over 30 years. Homes and commercial structures now have an insured property valued at nearly $4 trillion, noted the I.I.I. Because of the greater buildup along coastal areas and increasing construction costs, the cost of repairing and replacing structures due to natural disasters has increased dramatically over the last decade. Since 1990, insurers have paid more than $240 billion in catastrophe-related losses-or about $1.2 billion per month. The term "catastrophe" in the insurance industry denotes an event that causes more than $25 million in insured damage. Included are such well-known events as Hurricane Katrina and the Northridge earthquake, as well as many smaller disasters associated with tropical storms, tornados, wildfires, hail, ice and snow.

Other Things to Consider

Hurricanes can cause major floods. While standard homeowners, renters and business insurance policies cover wind and rain damage from hurricanes, they do not cover flooding, according to the I.I.I. Flood insurance is available from the National Flood ̽»¨¾«Ñ¡ Program (NFIP), a division of the Federal Emergency Management Agency, and can be purchased through insurance companies or agents. For more information, see .

The "comprehensive" portion of automobile insurance policies covers losses due to flooding, but not all drivers purchase comprehensive coverage. People often buy comprehensive coverage to protect cars when they are new but drop it as their market value declines.

For a business, the costs of a disaster can extend beyond the physical damage to the premises, equipment, furniture and other business property to the potential loss of income while the premises are unusable. A businesses disaster recovery plan should include a detailed review of the business's insurance policy to make sure there are no gaps in coverage. In addition to building and property coverage, the policy should include business interruption insurance, extra expense insurance and law or ordinance coverage.

Business interruption insurance (also known as business income insurance) provides coverage for lost revenue and normal operating expenses if the place of business becomes uninhabitable after a loss, or during the time repairs are being made. Extra expense insurance provides coverage for the extra expenses incurred after a disaster, such as temporary relocation or leasing of business equipment in order to avoid or minimize the suspension of operations during the time that repairs are being completed to the normal place of business. Ordinance or law coverage is in place to rebuild or repair the building in compliance with the most recent local building codes.

Even if the basic policy of a business covers expenses and loss of net business income, it may not cover income interruptions due to damage that occurs away from the premises, such as to a key customer or supplier or to a utility company. This additional coverage can also be added to an existing policy.

To learn more about how to insure against a hurricane, contact an insurance agent or company representative. More information on wind and hurricane deductibles along with home and business insurance information can be found on the I.I.I.'s Web site, .

For more information about disaster preparedness, go to the I.I.I.'s Disaster ̽»¨¾«Ñ¡ Information Web site: .

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.