Hurricane Insurance Coverage Gap: Wind-Driven Rain

May 25, 2021

After a series of above-average years for storm activity culminated in a 2020 season that set records for both frequency and severity, many longtime property owners in hurricane-prone areas probably can recite storm-preparedness checklists and evacuation routes by memory. Whether they know what potential storm damage their insurance covers, however, may be another matter.

While most policyholders understand that standard property insurance policies do not cover damage caused by flood, many are unaware that policies also typically exclude damage caused by wind-driven rain or hail – unless the structure first sustained damage during the storm that enabled the precipitation to enter. If a storm is so intense that wind-driven rain penetrates the tiniest of openings, you might not be covered for any resulting damage.

The only way to know for certain is to read your policy. And with forecasters predicting another above-average year for severe storm activity, the time to check is now.

Looking Back, Looking Ahead 

In a 2018 commentary for the Washington Post, “Hurricane-proofing Florida homes is worth the cost, and then some,” University of Austin professor Kevin Simmons reported:

“Since 1980, wind storms have caused almost $1 trillion in damage, with 85 percent of that amount (having occurred) since 2000. Increased population in coastal areas combined with the effects of a warming climate suggest that damage exceeding even that number will occur during the next 40 years.”

And then came 2020.

Last hurricane season saw 30 named storms (winds of 39 mph or greater), of which 13 became hurricanes (74 mph or greater) and six reached major hurricane level (111 mph or greater). Twelve of those storms made landfall in the contiguous United States, topping the previous record of nine, set in 1916. It was the fifth consecutive year in which at least one Category 5 hurricane hit the U.S.

The 2021 hurricane season – which officially extends from June 1 through November – isn’t expected to be as severe as 2020, but the National Oceanic and Atmospheric Administration (NOAA) is forecasting a worse-than-normal year, with 13 to 20 named storms, of which six to 10 are predicted to reach hurricane level, including three to five classified as major hurricanes. Another leading forecaster, Colorado State University, offers a similar outlook: 17 named storms, including eight hurricanes, four of them major, in 2021.

Marketing and binding insurance coverage takes time, and most Flood Insurance policies include a 30-day waiting period between date of purchase and coverage activation, so make sure you’re properly insured as soon as possible.

Deductibles and the Limitations Provision 

As the Insurance Information Institute (III) states in its “Hurricane season insurance guide,” “Insurers in every coastal state from Maine to Texas include separate deductibles for hurricanes and/or windstorms in their homeowners policies, stated on the Declarations (front) page of your homeowners policy.”

A named stormed deductible is often a percentage of the property’s value, rather than a flat rate, with percentages ranging from 1% to 10%. Depending on the policy, deductibles may be per event or per calendar year. If the deductible is per event, you could wind up paying it more than once in a single season.

Homeowners policies and Commercial Property Insurance also include provisions that exclude coverage of some perils. Here’s what you’ll find in the most common Insurance Services Office (ISO) commercial property policies – the Building and Personal Property Coverage Form (CP 00 10) and the Condominium Association Coverage Form (CP 00 17):

C. Limitations 

The following limitations apply to all policy forms and endorsements, unless otherwise stated. 

1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section. 

c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless: 

(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or 

(2) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure. 

Because of these exclusions, protecting yourself with adequate hurricane coverage typically requires riders or separate policies for Windstorm Insurance, as well as Flood Insurance.

Policy Options 

Insuring property in a hurricane-prone area offers several options, including:

  • Calendar Year Vs. Named Storm Deductible — Named storm deductibles typically are lower and come with lower premiums, but paying a deductible multiple times can be far more expensive. Not all carriers offer deductibles on a calendar-year basis, but, if available, it’s generally the preferable option.

  • Per Location Vs. Per Building — In some states, a commercial property insurance may include a per-building deductible or a per-location deductible, with blanket limits applying to multiple buildings. Location deductibles are based on a location’s total insured value while per-building deductibles apply only to the building hit by losses.

  • Actual Cash Value Vs. Replacement Value — Actual cash value (ACV) costs less, but it takes depreciation into account, and therefore pays less in the event of a claim. Replacement value is more expensive but pays more in coverage.

Work with your agent or broker to ensure your coverage is cost-efficient and customized to your needs.

What You Can Do 

Insuring property in hurricane-prone areas is expensive, but insurers do reward risk management and good claim histories. Here are steps you can take to mitigate the cost of hurricane insurance:
  • Hurricane-proof your building. Enhancements such as a new roof and impact-resistant glass can provide savings on your Commercial Property Insurance premium.

  • Adopt and administer a hurricane preparedness plan. This alone won’t earn you premium credits, but it will reduce the risk of claims, and the fewer claims in your loss history, the lower the cost of coverage. Your plan should include a home inventory of your valuables and other prized possessions, as well as digital storage of important documents.

  • Consider hiring a private weather service. Working with a professional meteorologist may provide you with highly specified forecasts for evaluating risk and determining what actions are necessary to prepare and safeguard your property.

  • Understand your commercial property’s insurance rating. Alera Group’s brief guide to commercial property ratings provides insight on contributing factors such as construction, occupancy, protection and exposure.

To receive the guide, click the link below.


About the Author

Aaron Weber
Director of Commercial Insurance Sales
A&B Insurance and Risk Management, An Alera Group Company

Aaron Weber has more than 15 years’ experience as a commercial insurance executive and sales leader. He is certified as a Construction Risk and Insurance Specialist (CRIS) by the International Risk Management Institute.

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