Homeowners saved from costly hurricane deductibles for Sandy

Most homeowners along the East Coast won't have to pay potentially huge hurricane deductibles before insurance coverage kicks in for damage caused by Tropical Storm Sandy, say state officials.

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Many homeowner insurance policies have a hurricane deductible based on a percentage of the property's insured value -- typically from 1 to 5 percent. For instance, a homeowner with a 5 percent deductible would pay for the first $15,000 of damage on a home insured for $300,000. (See: "Hurricanes and insurance: 5 must-know facts.")

Although Sandy was designated a hurricane for the majority of time it traveled up the coast, it failed to sustain hurricane-force winds at landfall, so it was officially a tropical storm. That means homeowners in Connecticut, New Jersey, New York and Maryland won't be on the hook for costly hurricane deductibles and state officials are putting insurers on notice.

"Homeowners should not have to pay hurricane deductibles for damage caused by the storm and insurers should understand the Department of Financial Services will be monitoring how claims are handled," New York’s Gov. Andrew Cuomo said in a statement.

In New Jersey, the Department of Banking and Insurance (DOBI) also informed the state's insurers that hurricane deductibles don't apply, says spokesperson Ed Rogan.

Under New Jersey law, hurricane deductibles kick in if two requirements are met: the storm is classified as a hurricane by the National Weather Service when it strikes the state and it also has sustained winds of 74 mph while inland. "In this case it was downgraded before it hit land here, so we didn't even have to get into the wind part of it," says Rogan.

The Maryland Insurance Administration and Connecticut Insurance Department also issued  statements alerting insurers of the storm's failure to trigger hurricane deductibles.

In Connecticut new insurance law kicks in for Sandy

Last year after Tropical Storm Irene walloped Connecticut, the state passed a new law designed to tighten up requirements for hurricane deductibles, says Donna Tommelleo, spokesperson for the Connecticut Insurance Department. It has the same storm designation and wind requirements as the law in New Jersey – hurricane status at landfall and sustained 74 mph winds.

"Last year, with Irene, hurricane deductibles could have applied in some cases because we had looser guidelines, not laws on the books that allowed some carriers to impose the deductibles if there was a hurricane warning. Irene was downgraded from a hurricane, and because it wasn't a hurricane, the governor asked the industry to waive the deductibles, and about 90 percent of them did," says Tommelleo."State Farm was the only one that did not waive it, and that was their choice." (See: "After Sandy: Public insurance adjusters streamline big claims.")

Flood damage still at issue

While homeowners may be spared from hurricane deductibles for wind damage, many are experiencing damage due to flooding, which is not covered by standard home insurance policies. (See: "5 ways Mother Nature undermines your home insurance.")

Floods are covered by federally backed flood insurance policies administered through the National Flood Insurance Program (NFIP), which is overseen by FEMA. Here are three key things to know about the NFIP:

• Flood insurance policies have a 30-day waiting period from time of purchase before they go into effect.
• Building property coverage is capped at $250,000.
• Coverage for the items in your home is capped at $100,000.

Tips for filing a claim during after a natural disaster

If you need to file a claim, here are tips from the Insurance Information Institute to guide you through the process:

• Prepare an inventory of damaged or destroyed items and give a copy to your insurer. Don't throw out damaged items until the adjuster has visited. Photograph or videotape the damage.
• If you need to make temporary repairs, keep receipts and give these to your insurer. Do not make permanent repairs until an adjuster has visited the property.
• Make a list of everything you want to show the adjuster -- for example, cracks in the walls and missing roof tiles. You should also get the electrical system checked.
• Get written bids from licensed contractors. The bids should include details of the materials to be used and prices on a line-by-line basis.