By Beth Pinsker Gladstone
NEW YORK, Nov 1 (Reuters) - The governors of New York, New Jersey and other U.S. states said on Wednesday that insurance companies should not charge hurricane deductibles that cost tens of thousands of dollars to state homeowners who file claims for damage from Sandy because it was labeled a "post-tropical storm" by the time it hit land.
Many homeowners have already filed insurance claims in the wake of Sandy. While hurricane deductible clauses are written in various ways, many designate a higher deductible to be paid for named storms designated hurricanes, said Robert Hunter, director of insurance for the Consumer Federation of America.
While a typical homeowners policy has a deductible of a flat fee like $500 or $1,000, hurricane deductibles are a percentage of total home value, typically 1 to 5 percent. A $400,000 shore house, with a 5 percent deductible, would have out-of-pocket costs of $20,000.
"Homeowners should not have to pay hurricane deductibles for damage caused by the storm and insurers should understand the Department of Financial Services will be monitoring how claims are handled," New York Governor Andrew Cuomo said in a press release.
New Jersey, where the storm first made official landfall, said the hurricane deductible would not apply. The change in the storm's designation to post-tropical cyclone just before hitting the barrier islands, "will save a lot people a lot of money," says Ed Rogan, spokesperson for the New Jersey department of banking and insurance.
Connecticut made a similar announcement, as did other states. The Maryland Insurance Administration said in a statement: "The National Weather Service did not issue hurricane warnings for any Maryland counties. Therefore, percentage deductibles will not apply to homeowners policies in Maryland for damage caused by the October 29-30 storm." (Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance. Reporting by Linda Stern.)
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During a hurricane, there are often separate deductibles for high force winds. The deductibles are often expensive and can be up to 5 percent of the home's insured value, <a href="http://www.hlntv.com/article/2012/10/29/hurricane-sandy-flood-insurance-damage">according to HLN.</a>
Most policies cover damage caused by wind and will cover flooding caused by a tree crashing into the roof, <a href="http://www.usatoday.com/story/money/personalfinance/2012/10/29/hurrican-sandy-homeowners-insurance/1666077/">according to USA Today.</a>
Most home insurance policies do not cover flooding. Flood insurance usually has to be purchased separately, <a href="http://www.farmers.com/flood_insurance.html">according to Farmers.com.</a>
Flooding At Shorelines
Mortgage lenders usually force homeowners living near shorelines to have federal flood insurance, <a href="http://www.reuters.com/article/2012/10/29/us-storm-sandy-claims-idUSBRE89S12C20121029">according to Reuters.</a> So you're likely covered if you don't own your home outright and you live near a shoreline.
Federal Disaster Areas
Even when a federal disaster area is declared, assistance comes in the form of loans that often have to be repaid, according to <a href="http://www.washingtonpost.com/business/economy/homeowners-may-learn-limits-of-their-insurance/2012/10/29/2dac842a-21f9-11e2-ac85-e669876c6a24_story.html">the Washington Post.</a>
Anti-Concurrent Causation Clauses
Many insurance policies do not cover damage caused my multiple sources, like wind and flooding, <a href="http://www.reuters.com/article/2012/10/29/us-storm-sandy-claims-idUSBRE89S12C20121029">according to Reuters.</a>
Generally, damage to cars caused by falling trees and flooding is only covered by comprehensive insurance, not by liability insurance, <a href="http://www.foxbusiness.com/personal-finance/2011/08/27/flood-damaged-cars-your-top-questions-answered/">according to Fox Business.</a>
Renters often have to pay separately for flood insurance, <a href="http://blogs.smartmoney.com/advice/2011/08/25/will-my-insurance-cover-hurricane-damage/" target="_hplink">according to Smart Money.</a>