Homeowner’s Hurricane Insurance
The big question what will filing cost me?
- Two types of coverage:
- Replacement Coverage – Hurricane coverage is separate from other coverages and riders that you may carry under your homeowner’s policy. Tropical storms are typically covered per named storm, and the deductible (your out-of-pocket expense) is a percentage (anywhere from 2-5%) of what it will cost you to rebuild or replace all or part of your home. Many policies have a built-in formula for increasing the coverage amount as replacement costs become more expensive, but it is the insured party’s responsibility to ensure the coverage is adequate and that they don’t pay for more insurance than they will ever use.
- Depreciated Value Coverage – This coverage reduces over time as value decreases. Since most real estate investments increase value over time, depreciated value coverage isn’t typically the popular choice and you likely don’t have it. If you do, however, you could end up paying much more when/if you need to file a claim.
- Other costs:
- Insurance companies almost always reserve the right to increase your premiums or cancel your insurance if you file a claim. Even a denied claim can hike premiums. The impact of a claim varies from state to state depending on how tightly insurance companies are regulated through legislation. If your policy gets canceled for filing claims, you’ll need to find someone willing to offer you insurance with your particular claims history. Due to the risk perceived by underwriters, prepare yourself for very high premiums and inadequate coverage. Insured parties are usually considered high risk if they file more than one claim within a 10-year period. And yes, insurance companies use something called Comprehensive Loss Underwriting Exchange (CLUE), a database that has every claim you’ve ever filed, along with other tools to evaluate your insurability.
Is it Worth Filing the Claim?
- If your deductible amount is higher than the amount of damage you are claiming, it’s definitely NOT worth making the claim.
- If the claim amount is only slightly higher than the deductible, it’s a judgement call whether you want to risk raised premiums or cancellation to cover whatever the difference is.
- If you have catastrophic damage, need some big-ticket items like a roof, or have cumulative damage that sets you back a great deal more than what the deductible will cost, filing a claim is more than likely your best option. Carefully consider the risks of higher premiums, cancelation or claim denial, then make the decision.
- Making the decision to file or not can be complicated. If you find yourself having difficulty making this decision, I encourage you to chat with an attorney who specializes in such matters. DO NOT call your insurance company until you are ready and committed to file.