Deductibles catch many Lowcountry homeowners by surprise

Hurricane Matthew added insult to injury for some southern Beaufort County residents who learned their home insurance policies came with extra-high deductibles.

Depending on the company and the type of policy, deductibles typically range between 2 percent and 5 percent of the home’s value for damage caused by wind and hail, named storms or hurricanes. That means the owner of a $500,000 home with a 5 percent deductible could pay as much as $25,000 out of pocket for repairs.

Some homeowners cried foul, pointing to the hefty annual premiums they’ve paid even though a major hurricane hasn’t hit the area in more than 20 years. Insurers responded that covering coastal areas means higher risks, and the high deductibles and premiums protect their bottom lines.

So with no indications that insurance costs will drop in the future — and the possibility costs caused by Hurricane Matthew might, in fact, cause them to rise — what’s a homeowner to do?

RETHINK YOUR COVERAGE

If you live east of Interstate 95 in the Lowcountry, there’s little chance you can avoid a percentage deductible for hurricane damage. You might, however, be able to get a standard deductible for wind and hail and named storms.

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Because the area has escaped a hurricane or tropical storm for so long, many people chose a 5 percent deductible instead of 2 percent, thinking they would be safe paying the lower premiums. Hurricane Matthew has changed that, says Karen Waffenschmidt, HUB International professional lines manager for Hilton Head Island and Bluffton. She says many clients are now lowering their deductibles from 5 percent to 2 percent.

“I think we’ve gone so long without a storm that it’s kind of a situation of, oh, it’s never going to hit us. But it did,” she says. “Going forward, I think more and more people are going to start looking at their policies and go, ‘You know what, I was lucky enough I didn’t have damage or I had minor damage, but I think I want to look at the lower deductible.’”

A lower deductible will mean higher premiums, anywhere from $200 to $1,000 more a year, depending on how close to the coast you live, the type of policy you select and the company you choose.

MAKING THE RIGHT CHOICE

In the past five years, more companies have entered the southern Beaufort County home insurance market, offering an array of options. During that time, property owners have been able to shift out of the S.C. Wind Pool, which has percentage deductibles for any type of wind and hail damage — named storm or not. Wind pool participants also have to get separate policies to cover fire and other damages; those policies carry standard deductibles.

Now more companies offer one policy to cover all types of home damage, except flooding, but choosing the right one can still be a challenge. The hardest part is selecting the type of deductible. Waffenschmidt recommends first determining how much you can afford to pay out of pocket should a catastrophe strike. She also recommends opting for just a hurricane deductible rather than a named-storm or wind-and-hail deductible, if that choice is available. That will limit the percentage deductible to only Category 1 or higher storms. Damage from wind and hail and named storms would fall under such a policy’s standard deductible, which is usually $2,500 to $5,000.

Another concern is how much you will be paid if your home is destroyed. You should not only look at the mortgage value of the home but the replacement cost as well. In calculating the replacement cost, Waffenschmidt says, her agency checks with local builders to determine the price per foot for construction in the homeowner’s surrounding neighborhood.

It’s also important to pick the right insurer. She doesn’t recommend choosing an insurance company with an A.M. Best rating of less than an A.

WHAT ABOUT UNREIMBURSED MATTHEW DAMAGE?

Many with homes damaged from the hurricane are still wondering how they will pay for repairs, especially if they don’t have significant savings accounts.

Government options are available for those who qualify. The Federal Emergency Management Agency offers disaster assistance for low- to moderate-income residents. The deadline to apply for FEMA aid is Dec. 13. Those who don’t qualify for FEMA aid might qualify for a U.S. Small Business Administration loan. You can also get federal tax relief for repair costs caused by Matthew when you file your 2016 federal tax return, or you can amend your 2015 return to get the money faster.

Whether you qualify for aid or not, make sure you keep making your monthly mortgage payments. If you need help or fall behind, ask the lending company to waive any late fees and allow you to defer payments temporarily.

Local churches and nonprofit organizations are also available to help. Those who need assistance can call 843-524-4357.