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Homeowners Saved From Costly Hurricane Deductibles For Sandy

Most homeowners along the East Coast won't have to pay potentially huge hurricane deductibles before insurance coverage kicks in for damage caused by Tropical Storm Sandy, say state officials.

Many homeowner insurance policies have a hurricane deductible based on a percentage of the property's insured value -- typically from 1 to 5 percent. For instance, a homeowner with a 5 percent deductible would pay for the first $15,000 of damage on a home insured for $300,000. (See: " Hurricanes and insurance: 5 must-know facts.")

Although Sandy was designated a hurricane for the majority of time it traveled up the coast, it failed to sustain hurricane-force winds at landfall, so it was officially a tropical storm. That means homeowners in Connecticut, New Jersey, New York and Maryland won't be on the hook for costly hurricane deductibles and state officials are putting insurers on notice.

"Homeowners should not have to pay hurricane deductibles for damage caused by the storm and insurers should understand the Department of Financial Services will be monitoring how claims are handled," New York's Gov. Andrew Cuomo said in a statement.

In New Jersey, the Department of Banking and Insurance ( DOBI) also informed the state's insurers that hurricane deductibles don't apply, says spokesperson Ed Rogan.

Under New Jersey law, hurricane deductibles kick in if two requirements are met: the storm is classified as a hurricane by the National Weather Service when it strikes the state and it also has sustained winds of 74 mph while inland. "In this case it was downgraded before it hit land here, so we didn't even have to get into the wind part of it," says Rogan.

The Maryland Insurance Administration and Connecticut Insurance Department also issued  statements alerting insurers of the storm's failure to trigger hurricane deductibles.

In Connecticut new insurance law kicks in for Sandy

Last year after Tropical Storm Irene walloped Connecticut, the state passed a new law designed to tighten up requirements for hurricane deductibles, says Donna Tommelleo, spokesperson for the Connecticut Insurance Department. It has the same storm designation and wind requirements as the law in New Jersey - hurricane status at landfall and sustained 74 mph winds.

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