Windstorm Insurance

What is windstorm insurance coverage, and who needs and qualifies for it?

windstorm-insuranceAs the name implies, windstorm coverage protects its holders principally against property damage caused by high winds.  Of course, like most forms of insurance, it has clearly stated coverage parameters and also usually has deductible amounts that the insured must pay.  These deductibles vary but many equal a percentage, perhaps one to five percent, of the claim.

WHO BUYS IT

Although this coverage may be purchased almost anywhere, areas which experience frequent high winds are its major subscribers.  Think, for instance, of the Atlantic seaboard in the USA, where high tropical winds and hurricanes are an ever-present threat. Hurricane Katrina, for instance, in 2005, wracked up a damage bill in excess of $81 billion, according to the National Hurricane Center.

And it’s only getting worse.  The New York Times, in an article studying the historical costs of hurricane damage, predicts that by 2020, a major hurricane could cause damages in excess of $500 billion. Why is that? The staggering increases are attributed mostly to the increase in property values and homes as well as the boom in construction along coastal areas most susceptible to hurricane damage.

Hurricanes are of course nature’s most lethal coup de grace. However, it’s your day-to-day smaller wind damage which accounts for most of the windstorm coverage protection that buyers seek protection against.

Another geographic region in the USA where residents often seek insurance protection against high winds is Tornado Alley. Although no official definition demarcates this media term, it roughly describes mid-central states that experience the highest frequency of wind and tornado damages. Every summer, newspapers run grisly and frightening photos of areas devastated by tornadoes.

Although most windstorm insurance providers occupy the private sector, states sometimes intervene and set aside reserves for high-risk areas that insurers may want to shy away from. In essence, this setup provides for shared risk between governmental and private insurers. Even then, however, private insurers usually sell and administer the coverage.

WHAT IS AND ISN’T COVERED

For a price, and a not insignificant one at that, a buyer can protect against almost any damages caused by high winds. However, typically, people buying this insurance seek principally to protect their homes and other buildings. And claims don’t just cover total losses. Many claims will pay out for relatively minor damages such as roofing shingles removed by winds.

However, certain exclusions prevail. In fact, most insurance companies exclude things like vehicles, boats, airplanes, and other personal vehicles. These items can be insured but they are usually insured under other policies.

Another large group of people buying windstorm insurance are farmers seeking to protect their crops against wind-related damage. Most every year in the midwest, high winds account for significant damage to corn, oats, wheat, and other cash-producing crops. A standard claim in these instances might give a farmer partial payment for wind damage that reduces his yield by some significant amount below his historical yield average.

COSTS

Costs relate directly to the amount of risk borne by the insurer. A farmer in Iowa seeking to protect 100 acres of corn against potential wind damage will face a significantly different premium than a large resort owner on Myrtle Beach.

One way homeowners may reduce premiums is to have a wind mitigation inspection. This inspection asseses and advises steps a homowner may take to lessen wind damage. Insurers know for a fact such steps reduce damages and consequently will reduce premiums for such safeguards.

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