Insurance Help & Information

So many of us who are fortunate enough to live in Florida grew up someplace else, and perhaps even spent part of our adult years in another state.  The laws regulating insurance are different from state to state, and if you began learning about the responsibilities of home ownership in another state, you may not be familiar with certain parts of your homeowners insurance policy in Florida.

In Florida, homeowners insurance policies have two different deductibles.  You will hear agents refer to AOP and Hurricane Deductible.

AOP is an acronym for All Other Perils.  In essence, AOP is the deductible amount for any damage that occurs from a situation that stems from something OTHER THAN a hurricane, EXCEPT for a flood.  A flood policy is a different type of insurance policy that we can save for a different blog post.

The AOP (All Other Perils) deductible is likely set up the way you have always thought of deductibles.  You choose an amount, perhaps $500, $1,000, or $2,500, and if you need to file a claim, the insurance company will deduct that amount from the payment of your claim.  If you have a tree fall on your bay window, and the bay window costs $2,800 to replace, and your AOP deductible is $500, the insurance company will pay $2,300 toward replacing your bay window.

The Hurricane deductible is a percentage value, typically 2% or 5%, but sometimes 1% or 10%.  If you choose a 2% Hurricane deductible, this does not mean that your deductible is 2% of whatever the claim is.  The deductible is actually 2% of the insured amount of your dwelling.

Let me tell it with some examples.  If a hurricane comes along and blows a tree into your bay window and you need to have the bay window replaced, and the cost of the bay window is $2,800, please don’t think that your deductible is $56.  It isn’t. 

On your insurance policy, there is an amount that says “Dwelling”.  The “Dwelling” amount is the replacement cost estimate (RCE) of your home; i.e., how much it would cost to actually rebuild your home.

Your Hurricane deductible is a percentage of the “Dwelling” amount.  Here is a continuation of your example.  Perhaps your “Dwelling” amount is $146,000.  That means it would cost $186,000 to rebuild your home.  On your policy, you chose a 2% Hurricane deductible.  That means your deductible for anything that stems from a hurricane is $2,920.  So if the hurricane comes and blows your house down, you will have to pay $2,920 toward the rebuilding of your home.  If the hurricane comes and blows your roof off, and it costs $18,000 to put a new roof on your home, you will pay $2,920 toward the cost of your new roof.

Those are the two different types of deductibles in Florida.  In Arizona they don’t have a separate deductible for hurricanes.  By having a different deductible from losses stemming from a hurricane, we are all protected.  Because there can be substantial losses during a hurricane, we all count on insurance companies maintaining their fiscal strength so that when many, many people have a claim at once, there is money to make payment on the many, many claims.  By having a different structure for deductibles during a hurricane, the insurance companies are able to maintain their fiscal strength, and you are able to turn to them when you need them.