Unexpected Costs May Hit Insured Floridians

Thousands of Floridians will get a welcome sight soon: a check that will allow them to begin repairing damage done by hurricanes Charley or Frances.

But for many there also will be an unwelcome sight: The amount they’re responsible for paying could be steep.

After Hurricane Andrew in 1992, insurers doing business in Florida were allowed to charge much higher deductibles on hurricane damage claims. Homeowners used to paying $500 or $1,000 deductibles for other kinds of damage, such as from a tornado, will pay 2% of the value of their home or more for their hurricane deductible. For homes valued at more than $100,000, homeowners would be responsible for at least $2,000 in repair costs. Other homeowners could see higher deductibles, as much as 5% of a home’s value.

The change was made in 1996, one of many concessions state lawmakers made to insurers to keep them selling hurricane coverage in Florida in the wake of Hurricane Andrew.

“People don’t realize they have a large deductible,” said Tom Gallagher, Florida’s chief financial officer. “I really think that’s a surprise people aren’t expecting.”

Ilyse Kusnetz knew her policy included the higher deductible. But, like most people, she didn’t expect to have to use it. When a 65-foot tree fell on her Orlando house during Charley, she became one of thousands looking at a large repair bill, one that she will be largely responsible for because of the higher deductible.

She doesn’t know how much yet -- but it could approach the full $2,400 cost of removing the tree and repairing shingle damage to her roof.

“For somebody like me, that’s an awful lot of money. It’s going to be a challenge to meet that deductible,” said Kusnetz, a community college professor.

She, like other Floridians, may face another difficulty: having to pay a double deductible because insurers require separate claims and deductibles for damage from separately named storms. If she has to make two large repair payments, it would be “a real hardship to meet it twice.”

Gov. Jeb Bush said the double deductible was something that might need to be changed. “That could be an issue that the Legislature looks at,” he said Tuesday.

But insurers say the higher deductibles keep rates lower than they otherwise would be. “I don’t think we have to justify it,” said Sam Miller, spokesman for the Florida Insurance Council. “Without it, rates would be considerably higher than they are.”

More than 15 other states have percentage deductibles on homeowners policies. For example, California does the same for earthquake policies.

Allstate Corp. and Citizens Property Insurance Corp., which reported the biggest losses from last month’s Hurricane Charley, may face the largest claims from Hurricane Frances. Hurricane Frances soaked much of Florida over the Labor Day weekend, causing insured losses of $3 billion to $6 billion, according to Risk Management Solutions, which specializes in catastrophe estimates.

Associated Press and Bloomberg News were used in compiling this report.