Was the storm that devastated much of the Northeast this week a hurricane or a tropical storm? To the people who are trying to rebuild their shattered homes — and lives — it would hardly seem to matter, but thanks to the insurance industry, the distinction is a huge one.
When a storm classified as a hurricane hits a coastal area, insurance companies typically require the property owner to absorb a higher share of the loss, paying a much higher deductible. If the storm is merely a tropical storm or lesser weather event, the insurer can’t weasel out beyond the normal deductible.
Sandy apparently was a close call — a hurricane all the way from the Caribbean until just before it reached landfall over New Jersey, when the National Weather Service reclassified it as a “post tropical storm.” But there was still some question until Wednesday, when Gov. Andrew Cuomo and the governors of Connecticut and New Jersey decreed that for insurance purposes, hurricane deductibles would not be allowed. So unless they challenge the declaration, insurers will be on the hook for the full amount.
The cost difference is substantial. According to a New York Times story, the owner of a $300,000 house with a $500 deductible might have to pay 30 times that amount out of pocket before insurance took over. A substantial difference like that should not revolve around an arbitrary distinction like a few miles per hour’s wind speed.
All homeowners’ premiums might go up a little if this loophole were outlawed, but it should be: No area of the country is free from catastrophic “acts of God” these days. Whether it’s a tornado in the heartland, a volcano in the mountains, a wildfire in the forest or a hurricane near the coast, if you’re insured, you should be insured in full. That’s the point, isn’t it?