Homeowners Insurance Deductibles Greatly Impacted By Storm Damages

The average rate for insurance homeowners need to protect their family abodes has risen by an average ranging from 4 percent to 6 percent across the United States largely due to recent storm damages, according to the Insurance Information Institute. Also rising is the size of the homeowner's insurance deductible required to help keep as low as possible the rates for insurance homeowners need.

The average rise in homeowners insurance rates is between two and three times greater than the rise in the consumer price index, according to the Insurance Information Institute. Pushing the rates higher has been a spate of bad storms that impacted much of the United States. From deadly tornadoes ravaging towns like St. Charles, Missouri, and Moore, Oklahoma, to deadly Hurricane Sandy causing a great deal of damage and destruction along the Atlantic coast in addition to the usual river flooding and tropical storm damages along various river ways and the Gulf Coast.

As a result, insurers have been taking steps to encourage homeowners to either pay more for home insurance or boost their deductibles – and often both. Insurers also have been shying away from replacement cost coverage policies in favor of actual cash value plans. 

Otherwise, they want homeowners to have higher deductibles to spread out the risk.

Deductibles can vary depending on the states and types used. For example, in Texas, there are two ways to apply a homeowners insurance deductible. One is called a “Clause 1” deductible and applies to claims involving windstorm damage. A windstorm might be a tornado, straight-line winds, or high winds accompanying a tropical storm or hurricane. They are among the most destructive elements in the Lone Star State.

The other way a Texas homeowners insurance deductible is applied would be a “Clause 2” deductible, which involves claims resulting from all other covered perils. Like in Texas, windstorms represent greater threats to homes than other weather-related perils and can account for a large percentage of damage claims in states where such events occur.

In some states, there might be specific “named storm” deductibles, such as a tropical cyclone deductible that applies when a hurricane or tropical storm causes damage to a home. Such a homeowners insurance deductible typically is much higher than those for other perils and can be a bargain for homeowners who are only marginally at risk for damage from such weather-related events.

Fortunately, there are many ways to mitigate potential damage from such storms. If any trees are located near a home, they can be removed to limit the possibility of one or more trees being blown over or having branches break off and crash into the insured home or other structures. Shutters also can be installed on windows to protect them from high winds and flying debris. Rooftops also can be reinforced and have new shingles placed that are more resistant to wind damage.

Once mitigation steps are taken, many home insurers will give rate discounts on insurance homeowners need. Some discounts can run as much as 20 percent, which makes the higher deductible amounts less necessary.