hurricane

What's in a name? When it comes to a storm, it could mean a higher deductible.

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The heavy rainfall, high winds, and storm surges associated with hurricanes and other intense storms can devastate any business, even those located hundreds of miles off of a coast. Because these storms have the potential to cause tens of billions of dollars in damage, insurance providers generally use special “named storm deductibles” to provide coverage in the event of a loss. Named storm deductibles typically cost more than traditional fixed-dollar deductibles, but specific circumstances trigger them and vary based on location. However, the details of these deductibles are important to know so you're prepared in the event of a severe storm.

Named Storm Deductibles: An Overview

Storms trigger Named Storm Deductibles: The National Weather Service (NWS) will name a tropical depression, tropical storm, or hurricane if it's severe enough.

The NWS first started to name storms to make it easier for the public to track and follow severe storms as they developed. However, after large hurricanes and tropical storms began to cause large amounts of damage, insurance providers began looking for ways to mitigate their losses. Named storm deductibles, tied to the time periods surrounding NWS-named storms, ensure insurance providers are responsible for a smaller portion of any loss caused by a named storm.

It’s important to note other organizations have started to name storms. The Weather Channel, a privately owned weather organization, recently began naming winter storms in order to make tracking them easier for its viewers. However, insurance providers only apply named storm deductibles to storms named by the NWS.

The Triggers for Named Storm Deductibles

The triggers for named storm deductibles can vary based on the insurance provider and location, although almost all triggers generally include a timing window, such as 24 hours before a storm's named by the NWS to 48 hours after it's downgraded to a tropical storm. During this window, your named storm deductible will apply to any damage instead of a normal wind and hail deductible.

Other triggers can include when a hurricane makes landfall or when a hurricane watch's declared. Because the triggers for named storm deductibles can vary significantly, it’s important to look up the exact rules as defined by the state you live in and your specific insurance policy.

Price Differences

Named storm deductibles generally cost more than regular deductibles because they're based on percentage rather than a fixed dollar amount. Most named storm deductibles range between 1-to-5 percent of your total insured amount, but in high-risk areas, deductibles can reach as high as 10 percent.

For example, imagine that you insured your business for $1.5 million. If normal wind or hail damage your business, you would pay a regular, fixed-dollar deductible before your insurance provider would provide coverage for the remaining damage. However, if during the window of a named storm deductible, the storm caused damage, your deductible would use a percentage to calculate the cost. For a five percent deductible, this would amount to an out-of-pocket expense of $75,000 before your insurance provider would pay for damages.

What It Means for You

Deductibles for damage caused by named storms are higher in order to mitigate the financial risk to insurance providers while still offering premiums that are relatively low. Additionally, many insurance providers believe that the high deductibles will encourage business owners to take proactive steps to protect their businesses from severe storms.

Let’s Have a Conversation

Have questions about named storm deductibles or other commercial insurance matters? Contact a Plexus P&C client executive at 847-307-6100. We're here to help, and we're happy to help.

Disclaimer and publishing credit: This Coverage Insights not intended to exhaustive nor should any discussion or opinions construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2016 Zywave, Inc. All rights reserved.

When hurricane debris lands on your property, what's next?

In the latest Plexus Property & Casualty Newsletter, we explore the question of who pays when a boat tossed ashore during a storm lands on your property.

News item: Row, row, row your boat, gently down ... the lawn?

Scores of boats swept ashore during Hurricane Irma (not pictured here) remain stuck where they are. Some are now sitting on the property of homeowners who don't own the boats, the Miami Herald reports. The question of whom will pay to remove some of these once-seafaring vessels remains unsettled, leaving the boats to decay where they sit. (Some boats are attracting rats, as the Herald notes.) From a business perspective, your property insurance will generally cover debris removal, though sublimits apply. Have coverage questions? We can help. Contact Plexus Senior Claims Analyst Joni Gould at 847-307-6140 or jgould@plexusgroupe.com.

Electronic driving records soon required for many fleet drivers

By mid-December, many trucking firms and other commercial drivers must begin complying with federal regulations requiring electronic logging devices (ELDs) to be used instead of the paper log books that were long a fixture in the trucking industry. The Federal Motor Carrier Safety Administration offers numerous compliance resources on the rule, which fully takes effect in 2019. For  more information on fleet risk management, contact Plexus P&C Client Executive Jim Jenkins at 847-307-6112 or jjenkins@plexusgroupe.com.

In M&A deals, don't forget the cyber coverage

In case you were on the fence regarding cyber insurance, here’s one more reason to consider it: if you ever look to sell your company, buyers might look kindly upon the coverage, for the insurance “gives some comfort that in the event of a breach, there is some resource available to respond to a significant breach,” Dan Cotter, an attorney for Chicago law firm Butler Rubin Saltarelli & Boyd LLP, told TheStreet.com for a recent story on cyber coverage. Plexus offers a wide range of cyber and M&A expertise; for more information, contact P&C Practice leader Mike Mann at 847-307-6111 or mmann@plexusgroupe.com.

Helpful insurance links, resources for storms

Currently a Category Five storm, Hurricane Irma could make landfall in Florida by Sunday, according to the National Hurricane Center. From there, the storm could move north and east to affect parts of Georgia and South Carolina. Irma's impact on renters, homeowners, and business owners could be significant. As a resource, we have put together a short fact sheet on insurance FAQs and contact information for U.S. areas most immediately affected by Irma.

A brief overview of common insurance coverages

Flood insurance: Flood coverage is required in some flood-prone areas, and possibly essential for homeowners, renters and business owners, as homeowners, renters and businessowners coverage typically excludes flood damage.

The National Flood Insurance Program oversees most U.S. flood policies. This is typical coverage under flood insurance.

Homeowners / renters insurance: These policies will cover structural, fire and other various damage inflicted by storms. A rental policy covers damage and loss to a leaseholder's apartment, including valuables.

Businessowners insurance policy (BOP): Businesses guarding against a wide range of risk, including property damage from storms, typically hold this coverage. The coverage often contains business interruption insurance, a must if operations are halted because of weather or another cause.

Auto insurance: Comprehensive auto coverage, will protect you in case of storm damage to a car. Note that flood coverage excludes car damage.

In all cases, it is good to known what each of your policies covers and excludes, and your insurance agent can be your greatest guide in this regard.

Beginning the post-storm claims process

To begin, policyholders are advised to inventory their belongings before a storm strikes (though, of course, that can be easier said than done when time is of the essence).

In the case of a loss, consider taking these steps:

⇒ Take care of this first if you need emergency assistance.

⇒ If -- and only if -- it is safe to do so, you may want to take action to begin reducing the impact of the loss. For instance, if there is water on your floor, and you have access to shut off your water, this would be a logical step, but only if it safe to proceed.

⇒ Contact your insurance agent. However, in the case of a major weather event, it is possible your agent might not be immediately available.

Resources -- national

FEMA offers numerous online resources on the flood insurance claims process, including infographics in more than a dozen languages and an in-depth fact sheet on claims.

Here is a list of toll-free numbers for property & casualty insurance carriers from the Property Casualty Insurers Association of America (PCIAA).

The PCIAA website has plenty of valuable information as well, including tips for before the storm.

Resources -- state

⇒ The Florida Office of Insurance Regulation offers information for state policyholders. Visit the organization's website, or contact the office via multiple phone numbers, including toll-free in-state at (877) 693-5236.

The Office of Insurance and Safety Fire Commissioner regulates Georgia's insurance industry. Telephone: 800-656-2298. The commission website offers search functions to find local insurance agents in Georgia, as well as other insurance information.

⇒ The South Carolina Department of Insurance has a host of information for policyholders, including a brochure on what to do before a storm. Telephone:  803-737-6160.