This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Pay More, Get Less: Percentage-based Deductibles

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:

  • Alabama
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Mississippi
  • New Jersey
  • New York
  • North Carolina
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Texas
  • Virginia
  • 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.

Apples to apples

There's a lot of anger over these percentage-based deductibles, particularly in Texas, which is already the most expensive state for homeowners' insurance. (See rankings on the Insurance Information Institute website.)

"We have pushed lawmakers to require home insurers to disclose a dollar equivalent alongside the percentage deductible on the policy so homeowners can make an apples-to-apples comparison," says Alex Winslow, executive director of Texas Watch. "And despite industry pushback, we passed a bill which requires this and are awaiting the signature of Gov. Perry."

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs