One of the greatest destructive forces to life and property is the hurricane. Helping clients prepare their businesses and homes against these disastrous risks is why you're in the property and casualty business.

No greater example of this risk occured in 2005 when Hurricane Katrina devastated the Gulf Coast of the U.S. Insurance companies have paid an estimated $40.6 billion on 1.7 million claims for damage to homes, businesses and vehicles in six states from Hurricane Katrina, the largest loss in the history of insurance.

By contrast, Hurricane Andrew, the biggest U.S. natural disaster pre-Katrina, resulted in $15.5 billion in losses in 1992 ($20.9 billion in today’s dollars) and 790,000 claims.

According to the Insurance Information Institute (I.I.I.), the four hurricanes in 2005—Katrina, Rita, Wilma and Dennis—generated more than $57 billion in insured losses and 3.3 million claims. Some 15,000 adjusters from across the United States were involved in helping policyholders recover from these storms. More than 95 percent of the 1.1 million homeowners insurance claims from Hurricane Katrina in Louisiana and Mississippi, totaling more than $15.5 billion, were settled within one year of the storm.

Those are the big picture industry impacts. Given that level of impact on residents of the Gulf Coast, it was surprising to see the results of a poll conducted by IPSOS Public Affairs in 2006 that found that 89 percent of homeowners in Louisiana and 93 percent in Mississippi are satisfied with their insurance company.

The survey reported that four in five people (82 percent in Louisiana and 80 percent in Mississippi) who filed a hurricane-related claim are satisfied with the way it was managed by their insurer. The circumstances of property damage and complete loss of a home for instance, are traumatic experiences. In those circumstance an 80%+ satisfaction rate is astounding.

The numbers above illustrate how Hurricane Katrina was a once in a lifetime disaster.... or was it? The Japanese Earthquake and Tsunami were also a once in a lifetime event, and by the way,...there's another on the horizon... San Francisco, Florida, Virginia Beach, Seattle --- are you next?

So, how do agents and brokers aide their clients in protecting their homes and busineeses against the losses resulting from a major hurricane?

Hurricane Deductible

One of the first steps says Michael Barry, the I.I.I.’s vice president, Media Relations. “It is important that coastal residents know what their hurricane deductible is and how it works.”

A deductible is the amount of money policyholders pay out-of-pocket before their insurance coverage kicks in. A standard homeowners insurance policy deductible is usually either $500 or $1,000. State insurance regulators in 18 states allow property insurance policies to include hurricane deductibles, which are tied to a percentage of a home’s insured value, rather than a flat dollar amount.

The states allowing hurricane deductibles include the suspects you'd expect: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia.

Hurricane deductibles apply solely to damage from hurricanes, and typically vary from 1 percent to 5 percent of the insured value of a home. For example, a policyholder whose home is insured for $200,000, and has a 2 percent hurricane deductible, would have to pay the first $4,000 needed to repair the home, if the loss were caused by a hurricane. In some coastal areas with high wind risk, insurers may incorporate hurricane deductibles even higher than 5 percent. Moreover, in some states policyholders can select higher hurricane deductibles in order to reduce their premiums. Insurers’ hurricane deductible plans are reviewed by state insurance regulators.

It's also important to understand the coverage trigger. Whether a hurricane deductible applies to a claim depends on the specific “trigger” selected by the insurance company. These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity. Due to these differences, homeowners should check their policies and speak to their agent or insurance company to learn exactly how their particular hurricane deductible works.

Business Issues

Every business owner needs the assurance that they possess sufficient coverage to pay for the indirect costs a disaster - the disruption to your business - as well as the cost of repair or rebuilding. Most policies do not cover flood or earthquake damage and you may need to buy separate insurance for these perils. Be sure you understand your policy deductibles and limits and hos they pertain to losses from a hurricane and the nuances of windstorm and flood coverage.

For a business, the costs of a disaster can extend beyond the physical damage to the premises, equipment, furniture and other business property. There's the potential loss of income due to business interruption while the premises are unusable. Business disaster recovery plans should include a detailed review of your insurance policies to ensure there are no gaps in coverage. This includes property insurance, business interruption insurance and extra expense insurance. Even if the basic policy covers expenses and loss of net business income, it may not cover income interruptions due to damage that occurs away from the premises, such as to a key customer or supplier or to the utility company. Insureds can generally buy this additional coverage and add it to the existing policy.

Most business owners are complacent about natural disasters until it happens to them. It's only when the owner has gone through a disaster that a disaster plan, including purchasing the proper insurance, is usually considered.

But, that once in a lifetime event, could occur tomorrow, are your homeowner and business policy clients ready?