State Farm Hurricane Deductibles in Louisiana Jump to 5%

State Farm’s 308,000 Louisiana homeowner’s customers are confronting an unpleasant change: their policies now include a mandatory 5 percent hurricane deductible.

State Farm spokesman Gary Stephenson told The Advocate that the hurricane deductible was included on new policies in November and added to existing customers as they renewed their policies on or after Dec. 1. Most policies had a 2 percent hurricane deductible.

That means a customer with a $200,000 house and 5 percent hurricane deductible will pay for the first $10,000 in damage before insurance kicks in, compared with the $4,000 the customer would have paid under a 2 percent deductible.

The mandatory hurricane deductible accompanied an average statewide rate increase of close to 9 percent on premiums policyholders pay for insurance. The increase averages 9 percent in Orleans and Jefferson Parishes, 7.5 percent in East Baton Rouge, and 9.4 percent in Lafayette, according to the Louisiana Department of Insurance.

The increased hurricane deductible wasn’t part of State Farm’s previously reported rate filing nor was it required to be.

“They (State Farm) can implement the deductible change as long as they apply it to all policyholders, and it’s done statewide,” said insurance department spokeswoman Ileana Ledet. The company doesn’t need the insurance department’s approval.

“Going to the 5 percent hurricane deductible is one step we are taking to help hold down premium rates as much as possible,” Stephenson said.

State Farm paid billions to its Louisiana customers for Hurricane Katrina claims and many millions more to cover policyholders’ damages from hurricanes Rita, Gustav, Humberto and Ike.

Stephenson said without the storm deductible, the rate increase on premiums would have been higher than 9 percent, but he did not know how much greater.