Homeowners save when Sandy downgraded

Coastal homeowners have more than one reason to be thankful Hurricane Sandy spared Delaware shores.

Not only did coastal communities escape the brunt of the storm, which has reaped apocalyptic-like damage over neighboring New Jersey shore towns, but a downgrade from Hurricane status before Sandy made landfall in Delaware could result in savings on insurance costs for some homeowners.

"At this time, we're not applying the hurricane deductible," said Anna Bryant, spokesman for State Farm Insurance for the Delaware, Maryland and Washington, D.C. area.

The hurricane deductible or, depending on wording used by an insurance company, a named-storm deductible, are recent offshoots of the wind deductible, a provision of many policies that has been around for years, said Bud Clark of Williams Insurance Agency.

The hurricane deductible came about after Hurricane Katrina in 2005 when insurance companies realized losses from hurricanes could be much higher than they anticipated, according to insurance trade association website www.iii.org. Following Katrina, a hurricane deductible was added to homeowners' policies in coastal areas susceptible to catastrophic losses.

Deductibles for hurricanes, named tropical storms and a general wind provision are different from the regular policy deductible that typically requires out-of-pocket expense between $500 and $1,000 before the insurance policy kicks in. Hurricane, named tropical storm and wind deductibles can run from 1 percent to 5 percent of the dwelling coverage cost, the website states. For real estate in pricey beach areas, even 1 percent could add up; the deductible would be $5,000 for a home insured at $500,000.

Still, Clark said he prefers insurance policies that offer a hurricane deductible.

"If a company offers a hurricane deductible, that's the one I offer a customer," he said.

Under a policy that has a hurricane or named storm-deductible, damage from a destructive wind event, such as straight-line winds that rolled through the Cape Region last summer causing damage along the way, would fall under the regular policy deductible, Clark said.

Sen. George Bunting, D-Rehoboth Beach, is an agent for State Farm Insurance. He said area customers got a break by not having to pay the hurricane deductible following Sandy.

"From that respect, it's tremendous for our customers," he said.

So far, Bunting said, his office has received one major claim for a tree that fell on a two-story house; the rest are small claims from wind damage. Flooding is covered by the National Flood Insurance program and is no longer covered by regular homeowners' policies, he said.

As of Oct. 30, Bryant said State Farm had received 300 homeowners' claims and 40 auto claims statewide following the storm. Nationally, State Farm has had 24,700 claims related to the storm, she said.

United States Automobile Association, which also offers home insurance policies, does not offer a hurricane deduction; it offers only a wind deductible, said Roger Wildermuth, spokesman for USAA. Policy holders typically would pay 2 percent of the dwelling coverage if their home is damaged by wind, he said. As of Oct. 31, USAA had received 17,000 property and auto claims as a result of the storm.