WIND & HAIL
What Is Wind & Hail Deductible Buyback Coverage ?
With the continuing hardening of the commercial property market in the United States , many insurance companies are shifting some of their up-front claims costs to the customer . One of the ways insurance companies are doing this is by implementing a 1 %, 2 %, or 5 % wind and hail deductible . The deductible percentage applies to the limit of insurance and not the amount of the claim . In many cases , there is a separate percentage deductible for the building and personal property .
EXAMPLE OF THE APPLICATION OF A PERCENTAGE DEDUCTIBLE
Assume the value of the insured building is $ 5,000,000 and the personal property is valued at $ 1,000,000 . In a wind or hail event that includes a 1 % wind / hail deductible , the owner of the building would incur two separate deductibles . For the building , the policyholder would incur the first $ 50,000 of damage ; for personal property , the first $ 10,000 of damage . In some cases , this can create a financial hardship for the buyer .
WHAT ARE THE BENEFITS OF WIND AND HAIL BUYBACK INSURANCE ?
Buying wind and hail buyback insurance , also known as a wind-hail deductible buyback ( WHDBB ), enables policyholders with significant wind exposures to reduce their financial burden following a loss by lowering their deductibles . With a wind and hail buyback insurance policy in place , policyholders can essentially buy down an increment or two from their percentage
deductible on their commercial property insurance policy .
As mentioned above , percentage property deductibles usually range from 1 % to 5 %. If a policyholder has a $ 5,000,000 building with a 5 % wind deductible of $ 250,000 , they could purchase a separate wind and hail buyback policy to cover 4 % of their 5 % deductible , reducing their out of pocket exposure to $ 50,000 .
Wind and hail buyback insurance helps property owners avoid severe out-ofpocket expenses in the event of a loss . This is particularly relevant in areas of the Midwest where there has been a large increase in the number of convection storms and high wind and hail events , and where insurance carriers are trying to offset some of the challenges of the hardening insurance market by increasing rates and / or deductibles .
These policies are also particularly useful for property owners who are subject to restriction caps on loans or mortgages . Sometimes , money lenders require property owners to reduce their insurance deductibles before they will grant loans . Having a wind and hail buyback deductible is an effective way for property owners to meet these demands .
HOW MUCH DOES WIND AND HAIL BUYBACK INSURANCE COST ?
Cincinnati Insurance Company , which specializes in property and liability insurance coverage , explains how the cost of wind and hail deductible buyback insurance varies on the specific exposures of the property . Typically , the premium is
a percentage of the policy limit , and ranges between 4 % and 12.5 %. So , using the above example , a $ 50,000 wind and hail deductible buyback could potentially cost the building owner between $ 1,600 and $ 5,000 , depending on their specific exposures .
WHEN DO WIND AND HAIL DEDUCTIBLE BUYBACKS APPLY ?
Wind and hail buyback insurance only kicks into action for losses triggered by a wind or hail event . So , if a property owner suffers a big fire loss , they won ’ t be able to reduce their deductible with a wind and hail buyback . They will have to pay their full standard policy deductible .
HOW HAS THE HARD INSURANCE MARKET IMPACTED THE WIND AND HAIL DEDUCTIBLE BUYBACK MARKET ?
Over the past few years , the United States has suffered a string of wind-related catastrophes , including some severe hurricanes . These weather events , in addition to other property loss drivers ( i . e ., flood , fire , hail , etc .), have taken their toll on the insurance industry . Many insurers are in the process of rebalancing their portfolios by reducing their capacity in loss-stricken areas , shoring up their underwriting guidelines , and increasing premiums and / or deductibles . Property owners in areas with severe wind and hail exposure are some of the hardest hit by the firming market conditions . This has resulted in more policyholders seeking deductible buyback solutions in order to offset price increases in their standard property policies . +
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