According to Michael Barry, the president for media relations at the Insurance Information Institute, this natural disaster caused terrific devastation estimated $40 billion. To cover all the losses insurance firms claimed to spend the amount equal 20 years of premiums collection.
As a result, there is a tendency for insurance firms to shift flat-rate deductible to percentage-based at states located in hurricane hazard area, including the Gulf Coast and Atlantic Coast. However, flat-rate deductibles are still available, though in non-coastal states. According to Jerry Hagis, a spokesman from Texas Department of Insurance, the whole insurance industry underwent a kind of analysis evaluating the exposure. As a result a new form of coverage was created - tiered coverage.
Here a flat deductible is still available against any damage except for hurricane and windstorm damage. So, three tires are included in home insurance for coastal homes:
- For hurricane damage - a percentage-based deductible
- For windstorms and hail - another percentage-based level
- For other damages - yet another deductible.
Actually, there is only a quarter of all home insurance policies in the United States with a percentage-based deductible and preferably they are offered for homeowners living in hurricane zones. Also these policies are state mandated.
Such proportion of percentage-based and flat-rate deductible lets to contract more homeowners who prefer fixed deductible. It is a kind of strategy used to pull out states which refer to high risk area, such as Florida and Texas. These tree tires were created to give choices to consumers. However, majority of home insurance plans on high risk territory are rather expensive. This is a reality of insurance marketplace.
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