With hurricanes, come questions about deductibles

Definitions of flood and wind determine how deductibles apply

In a hurricane or typhoon scenario, your facility may be exposed to different types of damage. Knowing how your insurance policy responds to these different types of damage and how deductibles are applied becomes a matter of contract certainty. Do you know what deductibles apply if your facility suffers a loss? If you have separate and distinct flood, wind and fire deductibles, do you understand which deductible is applicable to what damage. You should look to the definitions for wind and flood in your policies. Policies rely on these definitions to determine when to apply the specific wind or flood deductible.

For example, in AFM's proVision 4100 form, the definitions are as follows:

  • "Wind means direct action of wind including substance driven by wind. Wind does not mean or include anything defined as flood in this Policy."
  • "Flood means flood; surface waters; rising waters; storm surge, sea surge, wave wash; waves; tsunami; tide or tidal water; the release of water, the rising, overflowing or breaking of boundaries of natural or man-made bodies of water; or the spray therefrom; all whether driven by wind or not; or sewer backup resulting from any of the foregoing; regardless of any other cause or event, whether natural or man-made, contributing concurrently or in any other sequence of loss. Physical loss or damage from flood associated with a storm or weather disturbance whether or not identified by name by any meteorological authority, is considered to be flood within the terms of this Policy. However, physical loss or damage by fire, explosion or sprinkler leakage resulting from flood is not considered to be loss by flood within the terms and conditions of this Policy."

Deductibles come in different varieties and can apply to different types of loss:

  • Flat monetary amount
  • A percentage of the combined property value
  • A percentage of the annual business interruption value

There are variations in how insurance companies define flood and wind, and how deductibles apply. AFM strives for contract certainty with simple and clear policy wording. Please contact your account team if you have any questions about deductibles.

Note: This information is provided for purposes of illustration only, and does not constitute, replace, or supplement actual policy language. Each loss must be examined with reference to its own particular facts and circumstances, in light of applicable policy language. The liability of AFM is limited to that contained its insurance policies.