A significant difference in property insurance in Florida, which includes home insurance, vacation properties, and commercial buildings, is dealing with different kinds of deductibles than you are used to. This often catches out of state property owners by surprise so here is a breakdown of some deductible types you may encounter when insuring your property in Florida.
All Other Perils deductible
This is the deducible you are used to seeing. It is often a flat amount for covered perils such as fire, lightning, etc. We usually see amounts in the $1000 to $2500 range for this. Regardless of the amount of the loss, this deductible stays the same. However, in Florida this deductible usually doesn’t apply to wind (or flood). There's a separate deductible for that and in comes in several forms.
Wind related damages gets its own category here because it is such a frequent occurrence. Wind damage could be caused by something like a waterspout, tornado, straight-line wind, tropical storm, or hurricane. Wind-driven rain and hail damage is often put under this deductible as well. When this type of damage occurs, the wind deductible is triggered. It is often expressed as a percentage of the total value of the insured property amount.
The deductible is based on the total value of the property, not the amount of the damage done during a wind storm or the market value. Here's an example:
Wind Deductible Market Value Total Insured Value Damage during windstorm Your Cost
3% $1,000,000 $750,000 $500,000 $22,500
3% $500,000 $750,000 $100,000 $22,500
You can see the amount of damage doesn’t matter nor does the amount you paid for the house. Another thing that sticks out is just how much that deductible is, it's a lot so I'll talk more about that further down.
Sometimes there is a minimum deductible amount . This is more likely to be seen on a commercial property policy and usually only affects lower-value properties but it is something to watch out for.
It is possible to get a flat wind deductible instead of a percentage, but it increases premium so much on the front-end that it is often not worth it.
Named Storm deductible
Sometimes the wind deductible only applies if it is a named storm, meaning a Tropical Storm or Hurricane only. Policies with this wording treat tornados or straight line wind the same as fire or lightning, aka All Other Perils (see the next section). This reduces the chances you have to use that expensive wind deductible, which is usually a good thing!
This is something we find very helpful, especially for higher value homes. It is a companion product to a homeowners policy that reduces your wind deductible over time, leading to zero over a few years. You may have noticed from the chart above just how much a hurricane deductible is. A lot of people get trapped into thinking the best way to save on insurance cost is to get the lowest premium possible but here's why that is a bad idea.
Since 1900, the longest stretch Florida has gone without a major hurricane (Cat 3 or higher) making landfall is 12 years, but the average time between them is 4 years 4 months. So, assuming a storm damages your property sometime in the next 10 years:
Option 1 Option 2
Hurricane Deductible Home Value $500,000 Home Value $500,000
Annual Premium $3,000 $2,000
Hurricane deductible paid $0 $15,000
Total cost over 5 years $15,000 $25,000
Total cost over 10 years $30,000 $35,000
This all depends on when the storm happens of course but it could easily take 15 years for option 2 to pay off. However the premium difference is often not as much as this example shows and we recommend this product as often as we can.
Contact your insurance agent if you have questions about these products and the deductibles on your policy. Hurricane season is here so now is the time to prepare, physically and financially. Given the way 2020 is going, I doubt the hurricane season will cut us any breaks.