A Tale of Two Perils

Posted on June 8, 2020 by Chip Merlin

Hurricanes cause wind and flood damage, but insurance policies don’t cover both hazards

When a hurricane comes to town, you can pretty much count on it doing some serious property damage. If you live in a neighborhood with a high-risk of hurricane loss, you might have discovered in recent years that premiums for hazard insurance on your home or business have steadily increased, or maybe your carrier dropped you or radically changed the terms of your policy when it came time to renew. 

While nobody likes to pay higher premiums, the reasons for some increases are often legitimate because of the high risks involved for insurance companies offering coverage in hurricane zones. The Congressional Budget Office estimates that the average cost in storm damage in the United States during an average hurricane season runs to about $28 billion per year. In August 2005, Hurricane Katrina racked up a whopping $108 billion in wind and flood damage, and Hurricane Maria cost even more in September 2017 when it slammed into Puerto Rico with winds in excess of 175 mph.

Naturally, when insurance companies evaluate risk when deciding where to offer hazard insurance on properties, they charge more when the risks are high. Some steer clear altogether, putting home and business owners in high-risk areas in a bind.

Wind Peril

As hurricane season begins, make sure your existing property insurance policy specifically covers wind damage from hurricanes. If it doesn’t and you live in a hurricane zone, purchase a policy that does.

In coastal zones in Texas, Florida, and the Carolinas, homeowners often must go to insurance carriers that specialize in covering wind damage from hurricanes. These carriers include hurricane coverage in the primary policy, or they offer coverage on top of a primary policy.

Large businesses frequently purchase “difference in conditions insurance.” These policies cover perils that the primary policy excludes, like flood damage from hurricanes. Similarly, “excess insurance” provides for additional limits of coverage for commercial policies that limit the amount of coverage on structures. Excess insurance would provide benefits when the primary policy is not sufficient to cover the loss. 

Flood Peril

Insurance companies do not cover flood damage from hurricanes. Sure, the policy may say you’re covered if a burst pipe floods your house, but it will also say in the fine print that flood damage from hurricanes is excluded.

The Federal Flood Insurance Program offers hurricane flood coverage but limits payouts to maximum dollar amounts. Excess insurance through private insurance is necessary in cases where potential flood losses exceed the federal dollar limit.  An increasing number of specialty insurance carriers now offer flood insurance, allowing for greater flexibility in coverage and greater limits. Be wary of shopping on price alone. 

Many people think they don’t need flood insurance, until they get flooded out. I strongly recommend buying flood insurance even if the odds of being flooded in a hurricane seem like a million to one. Flood is often the most significant cause of loss from a hurricane. 

Hurricane season is here. Now is the time to review your property insurance policy to ensure that you’re covered for all risks associated with hurricanes.


Justice For The Policyholder

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