With many agents currently assisting clients in determining if they have claims and the insurance claim filing process in the aftermath of Hurricane Irma, one most common question received by the Florida Association of Insurance Agents has been: Should you report claims that fall below the hurricane deductible?
While it’s easy to understand why some agencies and customers don’t want to report losses that are likely below the hurricane deductible, the potential harm of not reporting a claim far outweighs the potential of doing so.
In the FAIA’s recent Question of The Day series, an agent wrote: “My customer has a 2 percent hurricane deductible. In her case that amounts to $5,000. She reported that her damage is minor, perhaps $3,000 to $3,500 at most. Should we report this claim?”
The short answer is, “Absolutely.”
The longer answer involves looking at the specific policy. While policies differ, I’ll focus on ISO forms. It’s critical to read each insurer’s coverage form.
The ISO form for personal residential (homeowners, dwelling etc.) states this:
We require that you promptly report any windstorm loss caused by a “hurricane occurrence” that is below the hurricane deductible so that we may consider the amount of such loss when adjusting claims for subsequent “hurricane occurrences” that occur during the calendar year.
The ISO form for commercial residential (condos, HOA’s, and apartments) states this:
If this policy contains a Windstorm Or Hail Deductible that applies on a calendar-year basis, the following requirement applies: When loss or damage resulting from a windstorm is below the Windstorm Or Hail Deductible, you must report such loss or damage to us, so that we can apply the amount(s) of such loss or damage in calculating the remainder of the Windstorm Or Hail Deductible for a calendar year. This requirement is in addition to any other duties imposed under this policy.
Here is the problem with not reporting a loss that appears to be below the hurricane deductible. Let’s assume a homeowners policy with Coverage A of $250,000 on the dwelling. A two percent hurricane deductible would be $5,000. (The same situation applies on a condominium master policy, as an example.) A hurricane hits with $3,000 in damage. If that loss is reported, and the next hurricane causes $20,000 in damage, then the customer has only a $2,000 deductible. The customer got “credit” by reporting the first loss. If the first loss had not been reported, on the second hurricane the full $5,000 deductible applies.
It is certainly understandable that some customers and agencies are fearful of reporting losses that are below the deductible. Those claims can lead to potential problems if the policy has to be moved to a different insurer at a later date. Many experts take the view that the potential harm of NOT reporting a claim far outweigh the potential harm of reporting the claim.
FAIA recommends that agents take the safe approach and report all losses, even those that initially appear to be below a policy deductible.
This article originally appeared on the Florida Association of Insurance Agents’ website and was reprinted on InsuranceJournal.com with permission from FAIA.