N.Y. governor warns insurers not to charge hurricane deductibles
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(Reuters) — The governors of New York, New Jersey and other U.S. states said on Wednesday that insurance companies should not charge hurricane deductibles that cost tens of thousands of dollars to state homeowners who file claims for damage from Sandy because it was labeled a "post-tropical storm" by the time it hit land.
Many homeowners have already filed insurance claims in the wake of Sandy. While hurricane deductible clauses are written in various ways, many designate a higher deductible to be paid for named storms designated hurricanes, said Robert Hunter, director of insurance for the Consumer Federation of America.
While a typical homeowners policy has a deductible of a flat fee like $500 or $1,000, hurricane deductibles are a percentage of total home value, typically 1 to 5%. A $400,000 shore house, with a 5% deductible, would have out-of-pocket costs of $20,000.
"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 Gov. Andrew Cuomo said in a press release.
New Jersey, where the storm first made official landfall, said the hurricane deductible would not apply. The change in the storm's designation to post-tropical cyclone just before hitting the barrier islands, "will save a lot people a lot of money," said a spokesman for the New Jersey department of banking and insurance.
Connecticut made a similar announcement, as did other states. The Maryland Insurance Administration said in a statement: "The National Weather Service did not issue hurricane warnings for any Maryland counties. Therefore, percentage deductibles will not apply to homeowners policies in Maryland for damage caused by the Oct. 29-30 storm."
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