Deductible hike shocks insured

Many Louisiana residents whose homes suffered damage compliments of Hurricanes Gustav and/or Ike are learning a cruel fact: their insurance policy requires them to foot a much higher bill to pay for repairs.

They once may have had a $500 or $1,000 deductible on their home insurance policies, but now some homeowners have insurance deductibles that are a percentage of the value of the home.

Homeowners can thank Hurricanes Katrina and Rita for the change in their policies. Following the two storms of 2005, many insurers decided to pull up stakes and stop writing insurance in Louisiana.

To lure companies back, the state allowed insurers to include a “named storm deductible” in their policies. Instead of a dollar amount for the policy’s deductible, it requires homeowners to pay a percentage of their home value as the deductible.

In some cases, the deductible is 5 percent. For a home valued at $150,000, the deductible for the homeowner is $7,500. That has led to some sticker shock for homeowners maybe you’re one of them who previously had a deductible of $500 or $1,000 to pay for any repairs.

The named storm deductibles give insurers the option of sharing the risk of storm damage with their policyholders, an insurance industry spokesman told The Advocate of Baton Rouge.

“What the named storm deductions do, it allows carriers to lower their rates because the consumer is taking some of the risk for themselves,” said Greg LaCoste, vice president with the Proper Casualty Insurers Association of America.

LaCoste said the higher deductible may encourage policyholders to invest in protective features like hurricane shutters to reduce the damage to their homes.

One thing’s for sure: It reduces the exposure to insurance companies.

Also, Amy Bach, executive director of United Policyholders, a consumers group, said it’s unclear whether the named storm deductibles have led to any lower insurance premiums in Louisiana.

Policyholders who don’t believe they are being treated fairly by an adjuster or their insurance company can file a complaint with the Consumer Advocacy Office within the state Department of Insurance.

Meanwhile, this latest saga over policy deductibles is a reminder to consumers to educate themselves on the finer points of their homeowner insurance.

– American Press, Lake Charles, La.