But when major storms began to pummel the East Coast, the concept spread north.
"Insurers are now expanding the northern boundary of the 'named-storm territory' from Virginia to Maine," says David Finnis, who covers the property-casualty market for insurance broker Willis North America. Hurricane deductibles are now in effect in 19 states and the District of Columbia.
According to the III, these states allow percentage-based home insurance deductibles:
- New Jersey
- New York
- North Carolina
- Rhode Island
- South Carolina
- Washington, D.C.
But hurricane deductibles couldn't save insurance companies when Superstorm Sandy hit right before Halloween last year. With winds just below the 74-mile-per-hour threshold for hurricane status when it reached land, eight hard-hit states issued "no-hurricane deductible" decrees, and insurers weren't allowed to impose percentage-based deductibles. That cost insurers $25 billion.And hurricane deductibles couldn't help insurers during the recent spate of 200-mile-per-hour tornadoes, which leveled several Midwestern towns and cost insurers more than $4 billion. As a result, many insurers now put another so-called "wind deductible" into their homeowners' policies. Simply put: Insurance won't pay if any wind, hurricane-strength or less, blows the roof off your home, or if hail shatters your windows and dents your siding, unless the damage exceeds your percentage-based deductible. "They will soon be everywhere," complains J. Robert Hunter of the Consumer Federation of America.