Insurers Limit Losses With Percentage Deductibles

In an effort to limit exposure to catastrophic events during this storm season, insurers along the United States coastal regions are implementing percentage deductibles for damages incurred by homeowners in lieu of traditional dollar-amount deductibles.


The percentage deductibles are based on a home’s insured value. For example, a claim for damages to a home valued at $100,000 with a deductible percentage set at 2 per cent would require the homeowner to pay the first $2,000.


The percentage deductibles range from 1 per cent to 5 per cent, according to the Insurance Information Institute, although state regulations governing insurance can vary.


In Connecticut, the Department of Insurance has approved the percentage deductibles while limiting the amount to 2 per cent.


The governor of Louisiana approved a bill recently that allows insurers to file a change a policy deductible based on its location from the Gulf of Mexico but which limits the deductible to 4 per cent of the property’s value.


Maryland, as of Oct. 1, and Rhode Island effective Aug. 24, have approved insurance percentage deductibles of up to 5 per cent, but subject to approval by state regulators.

This year’s storm season, most recently punctuated by Ike, has left tens of thousands of people homeless in the Carribbean while causing costly damage by flooding in Florida and some parts of Texas.


In Canada, the tail end of tropical storm Hanna caused some localized flooding in some parts of the Maritime provinces, but no catastrophic damages have been incurred to date this season.


The season is to last until Nov. 1.

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