Windstorm Coverage Forms and the Impacts to Premium and Deductible Exposure

Windstorm Coverage Forms and the Impacts to Premium and Deductible Exposure

April 09, 2021
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Hurricane season officially begins on June 1st so now is the time to review your Business or Condominium Association’s property insurance coverage so you can be financially prepared in the event of a loss caused by a windstorm.  In the vast majority of Commercial Property Insurance policies issued in Florida there are two separate deductibles.  The first has to do with losses sustained by perils other than wind (fire, theft, lightning, vandalism, etc.).  This is a flat amount per claim and the value of the insured building or contents does not impact the amount of the deductible.  Due to our exposure to catastrophic windstorm losses in the State of Florida and throughout the Southeast, insurers will assign a percentage deductible to losses sustained as a result of wind damage.  Simply put, the larger your exposure to loss is (building / contents value) the larger the applicable deductible is.  Most policies will have a 2%, 5% or even a 10% deductible based upon underwriting data.

 

If we look at a scenario where the building criteria allows for the business owner to select deductible options, it is easy to see that when the owner selects a higher deductible, the lower the premium will be.  What is sometimes overlooked when making this decision is when the chosen deductible will be applied.  There are three predominant coverage forms related to this: All Wind, Named Storm and Hurricane.  The first form states that the percentage deductible chosen will apply when the cause of loss is wind regardless of the source, a simple thunderstorm all the way to a major hurricane.  This is the least expensive option because it allows the carrier the widest range to apply the larger deductible thus lowering the potential claim payment.  The second form restricts the application of the chosen percentage deductible to those wind claims that are a result of a “Named Storm”.  A Named Storm designation can only come from the National Weather Bureau (NWB).  Although news outlets may call storms by a name, Superstorm Sandy for instance, unless the NWB declares it a named storm, the appropriate coverage form will apply.  Named Storms only include Tropical Storms and Hurricanes.  Finally, the most restrictive coverage form (for the carrier) is Hurricane only.  This requires that the wind damage is a result of a Hurricane otherwise the other policy deductible will apply.

 

When you review the coverage form that your current policy has, it is important to weigh the cost / benefit of selecting higher deductibles and broader coverage forms.  Premium savings may not be worth the potential application of a significantly higher deductible.  Given the current state of the insurance marketplace in Florida and throughout the country, now is the time to contact Galt Insurance for a thorough review of your current coverage forms.  We will explain the options you have and help you understand the impacts of each.