Virginia Property Owners Alerted to Insurers’ Higher Deductibles

December 14, 2006

Virginia’s Bureau of Insurance is advising property owners in the state that several top writers of property insurance are imposing mandatory hurricane deductibles of five percent on new and renewal policies. Many of those same policies previously carried mandatory deductibles of two or three percent.

“A five percent hurricane deductible on a dwelling means that a homeowner whose house is insured for $500,000 would be required to pay the first $25,000 if a hurricane causes damage to the dwelling,” said Commissioner of Insurance Alfred W. Gross. “It is important that consumers recognize the magnitude of such a change in the terms of the policy.”

Virginia insurance law does not prohibit insurers from using hurricane or other wind-related deductibles. However, insurers are required to notify their policyholders of any unilateral change in these deductibles and to explain how they work. Gross is sending letters to insurers reminding them of this notification requirement, which was added to Virginia law in 2004.

Hurricane and other wind-related deductibles are applied separately from any other deductible on the homeowners policy. The amount and application of these deductibles may vary by insurance company, home value, location, and other factors.

Gross said that consumers may wish to contact their agent to see if coverage is available with a lower deductible from the surplus lines market. Surplus lines carriers are approved to do business in Virginia, but are not subject to the same regulatory requirements as licensed insurers, and there is no coverage under the state guaranty fund if a surplus lines carrier becomes insolvent.

Dwelling and commercial property coverage is also available through the Virginia Property Insurance Association (VPIA), which insures homeowners and businesses throughout the state who have not been able to find coverage elsewhere.

Source: Virginia Bureau of Insurance

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