Hurricane deductibles are percentage or dollar deductibles that are higher than those for other perils or causes of loss. They are calculated as a percentage of the dollar amount of coverage on a dwelling. If the policy has mandatory deductibles, the insurer will not sell homeowners coverage without a hurricane deductible. When a deductible is optional, policyholders may also choose a lower deductible in exchange for a higher premium (a buyback) or a higher deductible for a premium credit.

Insurers in Rhode Island are not allowed to deny coverage based solely on proximity to the coast. The state Department of Business Regulation (DBR) has adopted an emergency regulation effective until August 28, 2008.

The regulation specifies that insurers may apply a hurricane deductible on homeowners insurance of no more than 5 percent of a home’s insured value. The trigger of a hurricane deductible must be clearly stated. Such deductibles will only be in effect for losses during the period when the National Hurricane Center issues a hurricane warning for any part of Rhode Island and will remain in effect for 24 hours after the last warning. Hurricane deductibles shall only apply if a storm is classified as hurricane by the National Hurricane Center. Windstorm deductibles may not be used.

Insurers may offer a flat dollar deductible instead of or in addition to a percentage deductible, but the total deductible may not exceed 5 percent of the insured value of the property. Premium credits or discounts must be provided if policies have hurricane deductibles. Insurers can require mitigation measures only in certain specified zones and must waive the hurricane deductible if the policyholder implements mitigation measures.

Insurers must provide clear and prominent notice of all hurricane deductibles and must offer at least two practical examples. The examples do not have to be tailored to the insured value of the specific property but must show how the deductible works.

More information can be obtained by going to the DBR Web site.