If there’s one thing Rhode Islanders should be familiar with by now, it’s the fine print on their homeowner-insurance policy.
For the last three years residents of the state have felt the brunt of nature’s fury. In 2010 there were historic spring floods. Last year was the damage of Tropical Storm Irene, and this year the power of Sandy.
In the case of Sandy, it has already been announced that hurricane deductibles are not applicable in the states of Rhode Island, Connecticut, Delaware, Pennsylvania, the District of Columbia, Maryland, and even in New York and New Jersey. That’s because the National Hurricane Center and the National Weather Service did not issue a hurricane warning for these states, or hurricane-force winds were not sustained at landfall, depending on the state and the policy.
The net effect is that in cases strictly involving wind damage not related to declared hurricanes, the consumer generally makes out better.
“If we are hit by a hurricane and it’s declared a hurricane, there are deductibles built into the policies that the home or business owner has to take more of the loss out of their pocket,” said Mark A. Male, executive vice president, secretary and treasurer of the Independent Insurance Agents of Rhode Island. “For example, if the standard deductable on a homeowner’s policy is a flat $500, but in a hurricane situation the deductable can be a percentage of, say, 2 percent, it works out to $4,000 on a $200,000 policy.”
Male said that hurricane deductibles could be a flat fee but that generally isn’t the case; most deductibles are either 1, 2 or 5 percent. Per Rhode Island law, the deductable for a homeowner cannot exceed 5 percent.
Such may not be the case for a commercial business. “Laws in Rhode Island provide for residential policies, specifically homeowner policies, which can have a hurricane deductible that is almost higher than one in the standard policy,” Male said.
Businesses, however, have no such restriction. They could have a wind-storm deductable, a named-storm deductible or a host of other variations on their policy, and there is no state regulation for insurance companies with commercial accounts to limit the deductible. Both the policy and deductible are controlled by what the insurer offers and what option the business chooses, thus the calculated gamble between premium versus deductible is weighed.