Narragansett Bay Insurance Company (NBIC). Deducing Deductibles. What is a
deductible, why do I have a deductible, and why do I have two kinds of.
Narragansett Bay Insurance Company (NBIC) Deducing Deductibles What is a deductible, why do I have a deductible, and why do I have two kinds of deductibles on my Homeowner’s insurance policy? Answers: A deductible is the amount that you have to pay, while your insurance may cover the rest or a percentage of the rest of your damages. The reasons for deductibles are to make insurance policies more affordable for the homeowner, and to reduce some of the risk insurance companies assume. The larger your deductible is, the lower your insurance premium is. Ever since the massive Hurricane Andrew ripped across Florida in 1992, insurance companies in coastal states have systematically added the “hurricane deductible” onto insurance policies. It’s important to understand that there are now two types of deductibles on your homeowner policy: 1. All Other Peril (AOP) deductible This deductible is for non-hurricane related claims like fire, theft, vandalism, accidental water discharge and acts of nature like lightning, tornados, and hail. These deductibles are usually $500, $1000 or $2500. 2. Hurricane deductible Your hurricane deductible is much different and only applies to named storms classified as hurricanes. With most carriers the standard hurricane deductible is 2% of your coverage “A” amount on your policy. Coverage “A” is your structure or dwelling coverage. Some people get confused thinking they have to only pay 2% of the damage which is a big difference from how it actually works. For example, if you home is insured for $300,000, a 2% deductible would be $6000. Other examples: 1% hurricane deductible would cost the homeowner the first $3,000 of the loss. A 5% deductible would be $15,000. Many insurance companies, including both the Massachusetts and Rhode Island FAIR Plans, have mandatory 2% wind deductibles. NBIC, on the other hand, offers the customer the choice of 0%, 1%, 2%, or 5% Hurricane deductibles on primary residences. Keep in mind that you, the customer, can choose the deductible which best fits your budget -- The higher the deductible, the lower the premium.
NBIC understands that these deductibles, while necessary, can be very costly to the homeowner. We do not apply the Hurricane Deductible as soon as hurricane speed winds damage your home (Category I Hurricane 74-95 MPH). We will only apply it for windstorm losses with wind speeds in excess of 95 MPH (Category II Hurricane or greater). This could mean the difference of thousands of out-of-pocket dollars for homeowners. The Massachusetts Fair Plan’s wind deductible and its impact on homeowners was recently the focus of an article in the Cape Cod Times. Take a look yourself by visiting: http://www.capecodonline.com/apps/pbcs.dll/article?AID=/20100909/OPINION/909033 1
