Insurance and hurricanes in Puerto Rico: deductibles, claims

In Puerto Rico, hurricanes are not a distant possibility: they are part of the calendar. This guide is for anyone who owns or will own a home on the island. It explains what a property policy covers, how the windstorm deductible works, why flood is separate, what rights the Insurance Code gives you and how to file a claim after a hurricane, using what the Office of the Commissioner of Insurance (OCS) and FEMA publish.¹

Of the policy limit, the windstorm deductible the insurer must offer you if you ask

1%⁸

For the insurer to acknowledge your claim

15 days⁸

Within which the insurer must resolve your claim

90 days⁸

How long an NFIP flood policy takes to start, with some exceptions

30 days¹⁰

What your property policy covers

The OCS explains that a residential policy covers damage to the house up to the policy amount, other structures (such as a detached garage or a fence), your personal property and additional living costs if you cannot live in the home because of a covered loss.² The key question is how you are paid: at actual cash valueactual cash value (ACV)Actual cash value (ACV) is a way a homeowners or renters insurance policy pays for damage: it gives you what it costs to repair or replace what was damaged minus depreciation, meaning the value it lost from age, use or wear. That is why it usually pays less than replacement cost, and you cover the difference. Many policies pay for your personal belongings this way unless you buy replacement cost coverage. And if you have that coverage, the first check on your claim is often for the actual cash value.See the full definitionClose, which subtracts depreciation, or at replacement costreplacement costReplacement cost is a way a home insurance policy pays for damage: it gives you the money to repair or rebuild your home, or replace your belongings, with materials of similar quality at today's prices, without subtracting what they lost in value from age or use (depreciation). It is different from actual cash value, which does subtract depreciation. Many insurers pay these claims in two checks: the first one minus depreciation, and the second, for the amount held back, when you finish the repair. Your policy says which of the two methods it uses.See the full definitionClose, which does not.²

The OCS stresses one point: the cost to rebuild is not the same as market value or the assessment. If you insure the home for less than it costs to rebuild, the payout may fall short and coinsurance penalties may apply.¹ That is why it advises reviewing your limits, especially if you added structures such as terraces, carports, solar panels or cisterns.¹

If you rent, remember that the owner’s insurance protects the structure, not your belongings: that is what renters insurancerenters insuranceRenters insurance, also called tenants insurance, protects your belongings and protects you when you rent. The landlord's insurance covers the building, but not your furniture, clothes or electronics. It usually includes three coverages: your personal property, even if it is stolen away from home; additional living expenses if a covered loss forces you to move out for a while; and personal liability if someone is hurt in your home. A standard policy does not cover floods, which are insured separately. Some landlords require it.See the full definitionClose is for.² The home insurance guide explains the rest of a policy’s terms.

The windstorm and hurricane deductible

The deductibledeductibleA deductible is the part of an insurance claim you pay yourself. When you have a covered loss, the insurance company subtracts the deductible from the claim amount and pays you the rest. You may have a different deductible for each type of coverage. You will find it on the first page of your policy, called the declarations page, along with your coverages and limits. In taxes, the word "deductible" means something else: an expense that can lower the taxes you owe.See the full definitionClose is what you pay before insurance pays. The OCS explains that residential policies normally have three different deductibles: one for earthquake, one for hurricane and one for other perils.² The Insurance Code sets rules for the windstorm one:

Example with real numbers

How to read your policy's windstorm deductible

What the Insurance Code says; your exact deductible is in your policy.

Deductible the insurer must offer you if you ask

1% of the policy limit for windstorm, with a minimum of no more than $500⁸

If the deductible is a percentage of the limit

The policy must clearly state the dollar amount⁸

If it is a percentage of the property's value

Only allowed if that value was agreed in advance in the policy (agreed value)⁸

If you live in a condominium

The insurer offers the option of a deductible prorated by the area affected⁸

If the insurer cannot offer the minimum deductible, for example because of the reinsurance market, it must justify that to the Commissioner.⁸ Always ask for the deductible in dollars to compare it with your savings.

Run it with your numbersFamily budget

The OCS explains that the premiuminsurance premiumAn insurance premium is what you pay the insurance company in exchange for your policy's protection. It can be paid in one lump sum or, more often, in periodic installments for the life of the contract. Each company decides whether to sell you a policy and how much to charge. For home insurance it usually looks at the cost to rebuild the home, building materials, location, nearness to a fire station, your past claims and, at some companies, your credit score. Discounts can lower it. If you stop paying the premium, the company can cancel your policy.See the full definitionClose depends, among other things, on the coverages, limits and deductibles you choose.² What matters is knowing how much you would have to pay yourself after a hurricane, and having it in your emergency fund.

Flood: almost never in your policy

Water from a flood is another story. The OCS reminds people that floods are generally excluded from property policies,¹ and that flood insurance is bought separately through the federal government’s National Flood Insurance Program (NFIP).² You can buy it whether you are inside or outside a high-risk area, from a property insurance agent or from your insurer.⁴

According to FloodSmart, the NFIP’s site, any owner in a participating community can buy it; a building policy covers up to $250,000 and a contents policy up to $100,000, with separate deductibles; and the rate does not change by provider.⁹ Coverage starts 30 days after purchase, unless you buy it when getting or renewing a mortgage, and the policy lasts a year. It does not cover temporary housing while you repair.¹⁰

Is it required? If your home is in a special flood hazard areaspecial flood hazard area (SFHA)A special flood hazard area (SFHA) is an area FEMA identifies on its maps as being at high risk of flooding. On the maps it shows up as zones that start with A, or with V on the coast, where there is also a hazard from storm waves. If your home is in one of these zones, in a community that takes part in the National Flood Insurance Program (NFIP), and you have a government-backed mortgage or one from a regulated lender, the law requires you to carry flood insurance. The lender must tell you in writing if the home is in one of these zones.See the full definitionClose and your mortgage is government-backed, yes. And if the property received federal disaster aid before, you need the insurance to get aid in the future: the requirement goes with the home, not the owner.¹¹ The flood insurance and NFIP guide explains how to buy it.

Before hurricane season

The OCS publishes a list to get ready before there is any threat:¹

1. Check that your policy is active and current.
2. Confirm that the limits reflect the current cost to rebuild or replace, not the sale price.
3. Know your hurricane, wind and other-risk deductibles, and go over limitations, coinsurance penalties and exclusions with your producer.
4. Take an inventory of your belongings with photos and video, and keep digital copies of the policy and receipts in a safe place.
5. Do not wait until the last minute: once a storm watch or warning is issued, insurers can temporarily restrict new policies or changes.

You have the right to a copy of your policy, written in English or Spanish, as you choose.⁸ And if you paid off the home, the OCS reminds you that the need to protect it does not end when the mortgage is paid.¹

After the hurricane: how to file a claim

Your claim, step by step

1. 1. Protect the home and document

   As soon as it is safe

   Take photos and video of the damage and make temporary repairs to prevent more damage.³⁵

2. 2. Keep every receipt

   Do not make permanent repairs before talking to your insurer: it might not pay for repairs it did not authorize.⁶

3. 3. File the claim

   As soon as possible

   Have your policy number; if you do not know who insures you, ask whoever financed your home.⁵

4. 4. The insurer acknowledges it

   Within 15 days

   It must do so within that time from when you notify it.⁸

5. 5. The inspection

   If it could not be arranged by phone, you have the right to up to three alternative dates in writing before your claim is closed; be there.⁶⁸

6. 6. The offer, with a breakdown

   It must explain the adjustment and why items were declined; receiving the check does not waive your claim.⁸

7. 7. The resolution

   Within 90 days

   Full payment, a written and well-founded denial, or closing if you do not cooperate. You can ask for reconsideration, resolved within 30 days.⁸⁸

If the Governor declares a state of emergency, the OCS can order insurers to make partial or advance payments for the items that are not in dispute. They must pay you no later than 10 days after you accept the offer in writing, and accepting it does not waive what remains in dispute.⁸ If the home became unlivable, most policies cover additional living expenses, such as a hotel, but not mortgage payments.⁶

Adjusters: who is who

The three kinds of adjuster

Paid by the insurer

Company or independent adjuster

• Works for the insurer and estimates the damage.⁶
• You do not pay them.⁶

You pay them

Public adjuster

• An option you can hire to represent you.⁵
• In Puerto Rico they must hold an OCS license.⁵
• You pay them.⁶

Hiring a public adjuster is an option, not a requirement: the OCS helps with your questions at no cost.⁶

On an NFIP flood claim, ask the adjuster for their Flood Control Number card. Payment can take four to eight weeks, and if you have a mortgage, the check is made out to you and your mortgage company. The NFIP does not cover mold, so clean and dry as soon as possible. If your claim is denied, you can appeal to FEMA.¹²

Your rights and what to do if the insurer does not comply

The Insurance Consumer Bill of Rights gives you, among others, the right to choose your insurer and producer, to have them show you their license, to a copy of your policy and to file a request for investigation with the Commissioner.⁸ Your lender cannot require you to buy insurance from a particular producer or insurer; and if it places insurance that protects only its own interest, it must first give you a list of at least five insurers to choose from.⁸

The Insurance Code also treats as unfair practices, among others, refusing to pay without a reasonable investigation, requiring you to sign a release that frees the insurer from obligations that were not negotiated and denying a valid claim on mere suspicion of fraud.⁸ If you think your insurer is not complying, you can file a request for investigation with the OCS, for example by email to investigaciones@ocs.pr.gov.⁷ The OCS answers at (787) 304-8686.¹

If the damage is large, you may also be entitled to federal disaster aid.³ The guide on what to do after a hurricane, flood or fire explains that path. Note: FloodSmart explains that disaster aid is usually a loan repaid with interest, while a flood claim payment does not have to be paid back.¹¹

If this is you

What matters most for your situation

You have a mortgage

You choose your insurer; the lender cannot impose one.⁸ An NFIP flood check is also made out to your mortgage company.¹²

You rent your home

The owner's insurance protects the structure; for your belongings you need your own policy.²

The hurricane already hit

Photos, temporary repairs with receipts and a claim as soon as possible.⁵

You live in the states and the home is on the island

If you do not know who insures the home, ask the institution that financed it.⁵ You have the right to a copy of the policy.⁸

Costly mistakes

The mistake and what to do instead

• Mistake: Insuring the home for its sale price.

  Instead: Insure it for what it costs to rebuild; otherwise coinsurance penalties may apply.¹

• Mistake: Seeing the deductible only as a percentage.

  Instead: The policy must state it in dollars; find it and compare it with your savings.⁸

• Mistake: Buying flood insurance when the storm is already coming.

  Instead: An NFIP policy takes 30 days to start, with some exceptions.¹⁰

• Mistake: Making permanent repairs before filing the claim.

  Instead: Make only temporary ones and keep the receipts.⁶

• Mistake: Signing a blanket release to get paid faster.

  Instead: Requiring a release from obligations that were not negotiated is an unfair practice; ask before you sign.⁸

What to do this week

1. Ask for a copy of your policy, in the language you prefer, and find your deductibles in dollars.⁸
2. Compare your coverage limit with the current cost to rebuild your home.¹
3. Ask whether the 1%-of-limit windstorm deductible the law requires insurers to offer makes sense for you.⁸
4. Get an NFIP flood quote before the season, because of the 30-day wait.¹⁰
5. Take an inventory of your belongings with photos and keep copies outside the home.¹
6. If you have questions about your policy or your claim, the OCS gives guidance at (787) 304-8686.¹ More island topics are under Puerto Rico.