June 1st marks the beginning of the most insurance time of the year.
It’s the start of the annual hurricane season in the Atlantic. Yes, of course. On the same date every year.
Since hurricane season only comes around once a year (and lasts for six months) now is the best time to honor this big time of the year and make sure we think about insurance ideas as we prepare ourselves for the possibility of a five-mile-hour evening drive from Florida to northern Georgia , or from coastal Texas to Oklahoma, or most of Louisiana to somewhere (anywhere else).
Since most insurance clients don’t currently build their own homes or buildings, there’s really no need to talk about how to strengthen a building against a gust of wind, unless, of course, you want to talk about secondary water resistance, hurricane tapes for connection to the roof wall, or impact-resistant glass. We actually want to talk about shock-resistant glass, but only to view videos of the company testing its windows by pushing panels on them at speeds of over 100mph. maybe in another time.
What we really need to talk about are the insurance issues that come up in relation to this time of year. As we usually do, I’d like to be sure to remind you that any policy wording quoted here comes from samples written and provided by ISO. These policies may be identical to the policies you are dealing with, but they may not be. Make sure you read and understand the actual policies that apply in your world, whether you work for an insurance company, an insurance agent, or an insurance consumer.
In general, insureds hate their deductibles. I know that because I hate discounts. On the other hand, I understand the reason for the discounts, and I understand how my own discounts apply, so at least I hate them knowing what I hate. And I only hate them when I have to deal with them. When I work on the insurance stuff, I really like the discounts.
That’s why we need to tackle the hottest discounts at this time of year. We’ll need to deal with both hurricane and wind and hail deductions because they are different, and that difference is important.
Let’s start from the beginning. A discount is a way for an insurance company to participate in the risk management of certain risks. A discount is a way of giving the insured some skin in dealing with certain losses. A discount is a great tool for getting the insured to care about a particular property. For example, there was an insured who had a series of relatively small claims, each under $5,000. They felt really safe making these claims, especially when they had the $250 deductible.
After two years of many of these claims, we’ve decided to raise the renewal deduction to $2,500. You might say it looks like a 10x approximation of the discount. Analysis of the claims pattern showed that the insured was negligent with his equipment, causing these small claims. The increased discount was a way to motivate them to take better care of their equipment and avoid those small losses. The company’s fear was that one day these small losses would turn into two very large ones. As we sometimes say, frequency generates intensity.
Whether you’re dealing with a deductible hurricane, gust of wind or hail, ISO certification reads the same in terms of how the deductions are applied.
gust wind or hail (hurricane) deductible accounts
The deductible (cyclone) is calculated separately from, and applies separately to:
- each building sustained loss or damage;
- Personal property in every building where there is loss or damage to personal property; And the
- Personal property in the open.
This is a change to the unapproved policy because it reads, in part, like this.
Where the incident involves a loss of more than one component of the covered property and separate insurance limits, the losses will not be combined in determining the application of the withholding. But the deductible will only be applied once per time.
For most losses, only one deduction applies without worrying about how many different types of property have been damaged. It doesn’t matter how many buildings or how many locations personal property has been damaged. There is only one discount. Except when you add a hurricane or gust of wind deductible. Then we calculate the deductible based on all damaged items.
Also, this discount is a percentage discount. The deductible is a percentage of the property’s value. Sometimes this is the maximum insurance and sometimes that is the cost of replacing the property. So if you have a $1,000,000 building and $500,000 in personal property with a 5% hurricane deduction, if both the building and personal property are damaged, the total deductible is $50,000 for the building and $25,000 for personal property. That’s a huge difference from the $5,000 or $10,000 deductible that many insured people have to deal with. Many insured will handle smaller amounts, but this is how we make the point.
These discounts are no joke.
Now, that’s the really hard part to deal with, the difference between a gust of wind and hail and a hurricane. Here is where you can make your money as a coverage analyst. that’s what I mean. Take a look at the definition of a hurricane (CP 03 23 Florida Calendar Hurricane Percentible Sondage Mossible).
Under the terms of this endorsement, a hurricane is a storm system that has been declared a hurricane by the National Hurricane Center of the National Weather Service (hereinafter NHC). The occurrence of a hurricane begins at the time a hurricane or hurricane warning is issued for any part of Florida by the NHC, and ends 72 hours after the termination of the last hurricane watch or hurricane warning issued for any part of Florida by the NHC.
The term cyclone is very specific, and it is very narrow. This means that the hurricane deductible only applies when there is a hurricane and there is only a hurricane when the NHC has issued hurricane watches or warnings. This is good for the insured because when the hurricane deduction does not apply, the deductible for fire applies.
If you were to look at the endorsement that creates a deductible gust of wind or hail, you will find that there is no definition of storm or hail. Without a definition in politics, we have to use a common definition, unless another part of the policy might define the term windstorm or hail. Spoiler alert, there is no definition of a storm or hail in politics.
According to Dictionary.com, an air storm is a storm with high winds but little or no precipitation.
According to Merriam-webster.com, an air storm is a storm characterized by high winds with little or no precipitation.
You get the point. A gust of wind means any strong winds that can damage property. Do you see how wide a deductible gust of wind or hail really is? Expands the cause of loss from a hurricane, which has a very specific definition of storm or hail, which means that any time the wind blows strong enough to shake a branch, or any hail falls, the deductible applies, which would be the same percentage as the hurricane deductible.
Here’s the tip, check to see if there’s a hurricane, gust or hail deductible in the policy and if there is, find some funding just in case the forecasters are correct and there are additional hurricanes this year. If the policy has a gust of wind or hail deductible, negotiate with the insurance company for a hurricane (or specific storm available in some states) deductible. The form of a gust of wind or hail deduction is bad news for any wind-prone insured.
The question comes up every year. Is there coverage for the costs of vacating an area when the governor orders an eviction? The answer is very simple.
No, well it probably isn’t. It’s possible that someone has a policy that has some coverage for eviction-related expenses, but I haven’t seen it before and it’s not on any ISO-based policy that I know of. It’s not just an insurable expense because no damage has been done. surely. If a hurricane passes and takes the roof to the next county, there is coverage in the homeowners policy for additional living expenses incurred due to damage to the dwelling caused by the hurricane. There is also coverage available for lost business income if the insured store has a tree in the showroom and there is business income coverage.
But there is resident There is no coverage for eviction expenses.
There is also coverage for damage to property that has been removed because it is at risk of hurricane damage. ISO commercial real estate policies have an additional coverage called property preservation. This additional coverage provides the insured with protection for their personal property that they are moving because their building has been damaged or may be damaged due to a covered cause of loss.
This isn’t more coverage, it’s a way of providing additional covered reasons for the loss of property already covered should it be damaged while the insured is trying to protect it from damage. If the insured loads his stock of an 80-inch TV into the back of his box truck to protect him from Hurricane George, there is coverage for any damage to those TVs, for example, if the bridge the truck was on collapses into the river and the TVs swept into the Gulf of Mexico.
But there is resident No coverage for evacuation expenses.
There’s more to cover, but that’s for another day. This is enough for all of us to contemplate and meditate on. Hurricane season has arrived. Let’s be ready.
natural disaster disaster hurricane