The recent flow of hurricanes into the United States has hit with unprecedented force. Hurricane Irma, the latest hurricane, was a Category 5 storm at times. How does the hurricane affect insurance claims? This article will specifically focus on Hurricane Irma, with certain elements parlayed into matters stemming from Hurricane Harvey.
Will Insurance Cover Hurricane Damages?
The short answer is that standard homeowners policies will indeed cover SOME damages from the hurricane. Last Friday, the Wall Street Journal published an excellent piece on the matter, including the broad impact of insurance on hurricane damages.
Standard homeowners insurance policies divide damage claims pretty specifically. Damages caused by wind are usually a covered causes of loss, while flooding itself is typically NOT covered. Furthermore, if flooding and wind damage occur simultaneously, that is NOT a covered cause of loss.
Properties near the coast have a greater negative impact, from an insurance standpoint. However, one must purchase of basic flood insurance (under U.S. law) when purchasing a home in a designated high-risk flood area with a federally-backed mortgage.
The state of Florida, specifically, has another interesting insurance twist. Since Florida will undoubtedly be the state that suffers the greatest damage, it begs the question: are insurers even capable of paying out insurance claims?
Federal Government Impact
The Florida Hurricane Catastrophe Fund contains approximately $17 billion, which is not as much as it seems. Estimates have the total Hurricane Irma damage cost at $100 billion. Hurricane Harvey damages in Texas are estimate at $190 billion. Insurers themselves would require reinsurance, in all likelihood, to produce claim payouts. This situation could prove quite costly for insurers. That's even after the "lucky break" given after the eye of the hurricane virtually missed Miami.
All in all, there is a high insurance stake at the federal level. An inability there to cover damages could prove catastrophic. Furthermore, certain policies do include a "hurricane deductible". This deductible, if triggered, includes an up to 10 percent deductible for the value of the damaged property. This would, of course, increase the out-of-pocket cost for the insured.
Make sure you check your applicable insurance policies, and see what losses you have covered. If you have any further questions, please feel free to comment below!
We at RCI would also like to take this moment to express our thoughts and prayers for the victims of these recent natural disasters.