Acentria Insurance Blog

The heavy rainfall, high winds and storm surges associated with hurricanes and other intense storms can devastate any home or business property, even those located hundreds of miles off of a coast. With the potential to cause tens of billions of dollars in damage, insurance companies and carriers generally use special, “named storm deductibles,” to provide coverage in the event of a loss.

Named storm deductibles are typically higher than traditional fixed-dollar deductibles for losses related to fire, theft and even water in some cases. Named storm deductibles are only triggered under specific circumstances and can vary based on location. However, it is important to know the details of these deductibles so your family, your home and even your business are prepared in the event of a severe storm.

What’s in a Name?

Named storm deductibles are triggered by just that—a tropical depression, tropical storm or hurricane that is severe enough to be named by the National Weather Service (NWS).

The NWS first started to name storms to make it easier for the public to track and follow severe storms as they developed. However, after large hurricanes and tropical storms began to cause large amounts of damage, insurance providers began looking for ways to mitigate their losses. Named storm deductibles, tied to the time periods surrounding the National Weather Service-named storms, help insurance providers mitigate losses caused by a named storm.

It is important to note that other organizations have started to name storms. The Weather Channel, a privately owned weather organization, recently began naming winter storms in order to make tracking them easier for its viewers. However, insurance providers only apply named storm deductibles to storms named by the NWS.

The Triggers for Named Storm Deductibles

The triggers for named storm deductibles can vary based on the insurance provider and location, although almost all triggers generally include a timing window, such as 24 hours before a storm is named by the NWS to 48 hours after it is downgraded to a tropical storm. During this window, your named storm deductible will apply to any damage instead of the normal wind and hail deductible.

Other triggers can include when a hurricane makes landfall or when a hurricane watch is declared. Because the triggers for named storm deductibles can vary significantly, it’s important to look up the exact rules as defined by the state you live in and your specific insurance policy.

Price Differences

Named storm deductibles are generally higher than regular deductibles because they are based on a percentage rather than on a fixed dollar amount. Most named storm deductibles are between 1%-5% of your total insured amount, but in high-risk areas, deductibles can reach as high as 10%.

For example, imagine that the Dwelling Coverage A on your home insurance policy is insured for $500,000. If your home is damaged by normal wind or hail loss, you would pay a regular, fixed-dollar deductible—usually $500 or $1,000—before your insurance provider would provide coverage for the remaining damage. However, if the damage was caused during the window of a named storm deductible, your deductible would be calculated using a percentage. For a 5% deductible, this would amount to an out-of-pocket expense of $25,000 before your insurance provider would pay for damages.

What it Means for You

Deductibles for damage caused by named storms are higher in order to mitigate the financial risk to insurance providers while still offering premiums that are relatively low. Additionally, many insurance providers believe that the high deductibles will encourage homeowners and other property owners to take proactive steps to protect their homes from severe storms.

For more information on named storm deductibles, tips to protect your home from severe storms or a review of your current home or property insurance policy, contact us today. 

Structural Issues and Aging Buildings

While modern building codes and structural engineering have made buildings extremely safe, facilities managers must maintain a high level of upkeep for them to remain that way. As buildings age, they can lose their structural integrity. As such, if simple repairs are left untended, they can balloon into bigger issues, potentially causing significant damage that can interrupt operations and/or even endanger others.

Continual maintenance and inspections are imperative for keeping buildings safe and operable. According to the University of Michigan School for Environment and Sustainability, 72% of commercial buildings in the United States are aged 20 years or older. It's around this milestone that facilities managers should expect to prepare significant funds for upgrades.

Structural Issues

Facilities managers need to keep a close eye on all components that make up a building's functionality. While it may seem that structural issues only refer to the foundation and walls, the reality is that all systems within a building must be working optimally to keep the building structurally sound for the long haul. Many structural issues can be attributed to the following:

• Concrete decay—Concrete decay is natural and occurs over time as buildings age. However, several issues can cause concrete to decay prematurely, including:
  • Placement issues—The common signs of placement issues include cracks, air bubbles visible in the concrete, pockets of rocks, honeycombing and cold joints.
  • Exposure—Buildings can suffer from exposure to the elements. Depending on location, coastal ocean salt or rock salt used in winter can increase the rate of concrete decay. Chemical deterioration can also occur as a result of acid rain due to pollution.
  • Wind—Excessive exposure to wind can cause concrete to develop shrinkage cracks and erode the outer building layers.
  • Freeze-thaw cycles—These cycles dampen concrete and cool it before there is time for proper drainage, causing expansion, scaling and delamination.
  • Steel support corrosion—When steel corrodes, it expands to create tensile stresses in the concrete. Cracking, delamination and spalling are often a result.

Decayed concrete should be replaced in a timely fashion. Otherwise, the building could sustain severe structural defects or collapse.

• Roofing—A few factors determine a roof's lifespan, including the type of roof, the climate and the roof’s maintenance history. If the roof is allowed to deteriorate and moisture spreads, other systems will fall apart soon after. Facilities managers should plan to conduct a roof inspection twice a year—once when the weather is at its hottest and once when it's at its coldest.
• Heating, ventilation and air conditioning (HVAC) systems—Inefficient HVAC systems can be costly to operate and cause air quality issues, such as mold. Mold can lead to structural damage since it feeds on and breaks down organic matter. When mold infests in walls, insulation, paper backing or carpeting, the materials must be removed and replaced. Improper heating and cooling can also cause damage due to a lack of efficient air circulation and ventilation.
• Electrical—Hot spots can form if the electrical wiring has loose connections, corroded wires/connectors, overloaded circuits, short circuits, imbalanced electrical loading, or faulty fuses, breakers and switches. The excessive heat from these hot spots could start a fire, and even a small fire has the ability to cause damage that hurts the structural integrity.
• Plumbing—Bad plumbing can cause health risks and have adverse effects on a building and the environment. Leaks can lead to mold and water damage. Some of the significant plumbing issues older buildings face include inefficient fixtures, bad equipment and lead in the pipes, the last of which can contaminate drinking water.

Prevention

Outside of a significant disaster or event, buildings don't typically deteriorate overnight. There are several preventive measures that can be taken to ensure a structure's longevity. These include:

• Hiring a good facilities manager—Facilities managers should know the building better than anyone else and act as the first line of defense by identifying any repairs that need to take place. Having a proactive facilities manager can save money and ensure buildings remain safe to occupy.
• Planning for repairs and maintenance—While setting aside a large sum of money for repairs that haven't happened yet may seem unnecessary, it can be beneficial in the long run when it's time for routine maintenance or when unexpected expenses occur.
• Conducting building inspections—Inspections should be performed by qualified inspectors who have location-specific expertise. Inspectors should be familiar with signs of damage due to local weather, such as areas with saltwater or snow loading. Structural engineers should assess the major structural components of the building to identify any necessary corrective actions. They should document inspections to allow for year-to-year comparisons of issues, being sure to take ample photos. Inspections should occur:
  • Annually
  • After any significant event, such as wind storms, earthquakes or hurricanes
  • Before and after any major addition or renovation
• Knowing local building codes—Building codes help maintain safe and structurally sound buildings. It's essential to know and understand local building codes so that all requirements are met. Some regulations in harsher environments may have additional requirements.
• Acting upon identified issues—When an issue arises, it should be dealt with swiftly. Early action can keep costs lower than if an issue is allowed to become more serious. The safety of those who live or work in the building depends on structural issues being addressed and resolved.

All buildings will need repairs and updates eventually. By being proactive, facilities managers can ensure that the structural integrity of a building and the safety of its tenants remain intact.

For more risk management guidance or a review of your current commercial property insurance portfolio, contact us today. At Acentria Insurance we are your dedicated resource for all things insurance. 

Your homeowner insurance policy can offer financial protection in the event of an unexpected disaster involving your home or personal property. But how you will be reimbursed following a claim depends on the type of coverage you have. There are two main valuation methods when it comes to homeowners insurance—replacement cost coverage (RC) and actual cash value coverage (ACV). By understanding the difference between these valuation methods, you can make informed decisions about your homeowner insurance policy(s) and secure coverage that meets your needs.

Key Differences Between Replacement Cost and Actual Cash Value
Although replacement cost coverage and actual cash value coverage can both offer financial protection in the event of a claim, the amount that your policy will pay out differs between these two valuation methods.

• Replacement cost coverage can offer compensation for the cost of replacing your stolen, damaged, or destroyed property with a brand-new version (as long as it’s similar in kind and quality to the original). For example, if your couch is destroyed in a house fire, replacement cost coverage would reimburse you for the cost of purchasing a comparable new couch. In other words, replacement cost coverage will replace your property without any deduction for depreciation.
  • This form of coverage can be especially beneficial in protecting against major losses, such as significant damage to the physical structure of your home or expensive items within your home. However, keep in mind that replacement cost coverage typically requires you to pay a higher premium. In addition, remember that you will only be compensated up to your policy limit amount—if you experience a covered loss that exceeds your policy limit, you may have to cover the difference. If you are concerned about the risk of a covered loss totaling more than your policy limit, be sure to consult your trusted broker to discuss additional policy options—such as guaranteed replacement cost coverage or extended replacement cost coverage—which can provide further financial protection.
    
• Actual cash value coverage, on the other hand, can offer compensation for the depreciated value of your stolen, damaged or destroyed property. This value is determined by the age, condition and expected remaining useful life of your property. Under this coverage, you wouldn’t be reimbursed for the full cost of replacing your destroyed couch from the above example. Rather, you would be compensated for the current market value of the couch, based on the condition it was in before the fire. That being said, even if you initially purchased the couch several years ago for $2,000, you might only be reimbursed $1,000 for your loss due to depreciation.
  • Although this form of coverage typically offers reduced compensation in the event of a covered claim, you will likely save money on your policy premium. Actual cash value coverage can be more suitable for individuals that live in low-risk areas (e.g., locations, where incidents such as heavy winds, fires or theft are less common,) or own fewer expensive items.

Which Coverage Is Best for You?

There are pros and cons to both replacement cost coverage and actual cash value coverage. In order to select the best coverage that meets your specific home insurance policy needs, follow these steps:

• Determine what you can afford by assessing the impact of both coverages on your financial stability. It’s important to consider the difference in premium costs and claim compensation amounts between each form of coverage.
• Create a home inventory checklist (be sure to include photos) of all of your belongings and their original value, as well as an estimate of their current value. This practice will help you better determine which coverage offers the best protection for your unique belongings. Keep in mind that certain high-value items—such as jewelry, collectible items or fine art—won’t be covered by your home insurance policy and will require specialized coverage.
• Calculate how much it would cost to rebuild your home if it were completely destroyed. Include added costs for labor, materials and any new or updated building codes in your community that you would be required to comply with. Avoid making a rough estimate for this cost—be as specific as possible to ensure you know just how much coverage you need.
• Analyze your personal risk and speak with a licensed insurance agent to review your options. Be sure to select a coverage option that fits within your budget, risk profile and comfort level.

We’re Here to Help

There are several factors to consider when determining which type of coverage is right for you, but you don’t have to navigate this decision alone. Acentria is here to walk you through your home insurance policy and provide expert guidance regarding which coverage option is best for you, your belongings and your wallet. For further coverage guidance, contact us today.