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Hurricane Deductible: Homeowners Could Pay Thousands For Sandy Damage Before Insurance Kicks In [UPDATED]

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HURRICANE DEDUCTIBLE
Carol Mason mops her flooded floor with towels after returning to her home in Atlantic City, N.J., Tuesday, Oct. 30, 2012. Many homeowners who suffered losses because of flooding from Hurricane Sandy are likely to find themselves out of luck. | AP

Have you ever heard of a “hurricane deductible?” Well, your insurance company probably has, and it could cost you thousands if your home was damaged during Hurricane Sandy.

In states that are prone to hurricanes, insurance companies have been increasingly adding hurricane deductibles that are charged to homeowners in areas that have been hit with wind of 74 miles per hour or more, CNNMoney reports. (Hurricane Sandy sustained winds of up to 90 mph, according to NJ.com. In New York City, wind gusts were measured at 85 mph, New York Daily News reports.)

Unlike most deductibles -- which are generally flat fees of around $500 to $1,000 that must be paid in order for insurance to kick in -- hurricane deductibles demand homeowners to pay roughly 1 to 5 percent of the property's value up front. For instance, a home valued at $250,000 could carry with it a deductible as high as $12,500 after a hurricane strikes.

Have you paid a high hurricane deductible because of Hurricane Sandy? We want to hear from you. Email us at money@huffingtonpost.com.

There are 18 states that permit insurers to charge hurricane deductibles, which include New Jersey, New York, Massachusetts and Connecticut, according to MoneyWatch. Hurricane deductibles are not legal in Ohio, New Hampshire of Pennsylvania. The Insurance Information Institute (III) outlines on its website how hurricane deductibles vary state-to-state.

Whether or not you'll be charged a hurricane deductible depends on the “trigger” of the damage, which is determined by your insurance company, according to the III. The selected trigger can vary depending on when the National Weather Service named the storm, declared a hurricane watch or warning or defined a hurricane’s intensity.

The institute recommends speaking with your insurance provider to find out precisely how your deductible works.

Another issue that homeowners need to be aware of is that standard homeowner policies often don’t cover damage from flooding, according to the AP. While most policies will cover wind damage or the damage from a tree falling on your house, USA Today reports that flood damage is different. The only way you’d have coverage after a flood is if you also have a specific flood insurance policy, according to the New York Times.

But the reality is that a majority of homeowners don’t even have flood insurance, the AP reports. Only 13 percent of homeowners nationwide have flood insurance plans down from 14 percent last year. The National Flood Insurance Program and a few private insurers provide coverage for up to $250,000 of structural damage to a home and $100,000 for personal possessions, according to an III press release.

Recent purchasers of homeowners insurance may also be in for a surprise. Insurance can take about a month before it goes into effect, according to the Washington Post.

As you begin to asses the damage to your home after the storm, taking an inventory of your losses and keeping your receipts can lessen your costs in the long run, according to Forbes.

Sandy is estimated to have caused $20 billion in damage, according to Bloomberg

UPDATE: October 31, 5:50 p.m. -- New York Governor Andrew Cuomo announced that New York homeowners will not have to pay hurricane deductibles from Sandy damage.

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