This piece is by Darren Wood, Founder of Recoop Disaster Insurance® – see the author bio below for more.
As we enter the heart of the hurricane season, new data reveals a troubling trend: rising insurance deductibles are limiting consumer protection options and, more critically, their financial ability to recover from disaster.
While the industry and consumers may focus more on premium inflation, the quieter story hiding in different pockets of the country is the rising out-of-pocket deductible costs policyholders must absorb before their coverage kicks in. Real-life stories coming from markets like Florida following Hurricane Milton in 2024, and the insight that fewer than half of American households have enough emergency savings to cover three months of expenses, make this lurking threat difficult to ignore.
The Growing Cost of Recovery
Over the past decade, insurers have increasingly turned to percentage-based deductibles – especially for windstorm and hurricane coverage – as a means to manage risk in disaster-prone areas. While this has helped stabilize carrier losses, it has shifted a greater financial burden onto American households. According to the Insurance Information Institute, average hurricane deductibles now range from 1% to 5% of a home’s insured value. That means for a $300,000 home, a 5% deductible leaves the policyholder responsible for $15,000 before receiving any assistance from their insurance company.
Depending on storm impact and damages, it may not be worth it for consumers to file a claim, taking on the financial burden of recovery from their own pockets. Recent consumer surveys show the consequences of these shifts and rising costs: Only 48% of U.S. homeowners earning less than $50,000 per year indicated they would be financially prepared for the costs associated with an extreme weather event in their community. Just 44% report they could afford to pay an unexpected $1,000 expense from their savings. For cash-strapped homeowners, it’s not just a financial issue, it’s a protection gap.
Expanded Exposure
Coastal storms are increasingly bringing destructive storm surges, which now account for a significant share of hurricane-related losses. Data from the National Oceanic and Atmospheric Administration (NOAA) and Federal Emergency Management Agency (FEMA) show that in storms like Hurricane Ian (2022) and Hurricane Ida (2021), storm surge caused over half of the losses, a peril that’s not typically covered in standard homeowners’ policies.
This trend is compounded by low take-up rates for flood insurance, even in high-risk areas. In Florida, for example, fewer than 20% of households outside of FEMA-designated flood zones carry a separate flood policy. Many homeowners still believe their standard policies offer broader coverage than they actually do. And it’s estimated that 75% of the nation’s flood insurance maps are out of date, causing households to overpay for insurance or be unaware of their true risk assessment and lacking proper coverage. These unfortunate knowledge gaps create another weak point in consumer disaster planning.
Bridging the Protection Gap
To help consumers adapt to rising deductible costs, insurers must double down on education, product innovation, and financial tools that build resilience.
Carriers and insurtechs are beginning to roll out deductible protection add-ons, like small-premium coverages that reimburse part or all of a deductible after a claim.
Parametric insurance models, which pay out based on event triggers like wind speed or storm surge height, are known for their simplicity. These solutions can be used to supplement traditional coverage and provide some liquidity for homeowners.
Recent disaster trend data and the need for fast recovery cash for consumers are at the core of why new products like Recoop Disaster Insurance® have been created, addressing multiple perils like hurricane with storm surge and providing flexible funding to help consumers overcome gaps in their homeowners coverage. Products like these can help restore confidence among price-sensitive consumers.
The industry also must enhance its efforts to educate policyholders about their actual exposure, especially in areas with low flood insurance adoption or high hurricane deductibles. Digital tools, such as personalized risk assessments and coverage calculators, can help close the knowledge gap.
Timely Action for a Financially Prepared Nation
The rising cost of insurance deductibles amid a backdrop of intensifying storms is a pressing issue, and one that requires collective action. As hurricane season peaks, insurers have a critical role to play in helping clients bridge the financial divide between coverage and recovery, helping them build the financial resilience to weather the storm.
As disaster trends and rising costs demonstrate, the insurance industry must rise to meet this challenge. Because while we cannot stop natural disasters, we can—and must—do more to help families withstand them.
About the Author: Darren Wood is the founder of Recoop Disaster Insurance®, a multi-peril disaster recovery insurance company. Darren is an insurance industry veteran. He previously served as the division president for Holmes Murphy, a top 25 insurance broker, where he was responsible for the delivery of value-added solutions to insurance clients. He also held senior project management and operational leadership roles with Marsh Consumer (now Mercer), focusing on the delivery of employee benefit and affinity solutions to consumers through Fortune 1,000 clients. Darren can be reached at darren@recoopinsurance.com.
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