Almost five years after Superstorm Sandy damaged or destroyed 346,000 homes in New Jersey, state residents there have the lowest level of awareness and understanding of how hurricane deductibles work in insurance claims, according to a poll by the Insurance Research Council.

The poll of homeowners in New Jersey, North Carolina, South Carolina, Florida and Texas found that 33 percent had never heard of hurricane deductibles, which are a higher deductible found in homeowner insurance policies that apply when a hurricane occurs. Also, a quarter of respondents didn’t understand deductibles in general.

Hurricane season is June 1-November 1. Superstorm Sandy formed on Oct.  22, 2012. It was the deadliest hurricane of the 2012 Atlantic hurricane season and the second-costliest in U.S. history. About $75 billion in damage was estimated, and at least 233 people were killed along its path in eight countries.

A percentage-based deductible

Hurricane deductibles became a major issue in 2012, according to the IRC, with misunderstandings about them because Sandy didn’t make landfall as a hurricane. Hurricane deductibles became more common after insurers were left with $15.5 billion in losses from Hurricane Andrew in 1992.

After Andrew, insurance companies offering policies in coastal areas where hurricanes are common — the Atlantic seaboard and the Gulf of Mexico — required home insurance policies to have separate, percentage-based deductibles for hurricane damage. They’re calculated as a percentage of the insured value of a home. This separate deductible is separate from the standard homeowners deductible.

The hurricane deductibles are applied in 19 states and the District of Columbia, according to the Insurance Information Institute, or III.

As part of an effort to keep insurance coverage available and affordable, insurers have added hurricane and named storm deductibles to limit losses through higher deductibles. They’re meant to share the risk by having the policyholder bear more of the risks without raising the overall premiums.

33% don’t know about hurricane deductible

The IRC poll found that one in three respondents with percentage-based deductibles didn’t know or were unsure of the percentage tied to their deductible. Forty percent didn’t understand the basis for calculating the deductible, and 25 percent incorrectly thought the percentage was applied to the total amount of their claim.

These second deductibles apply only to damage caused by hurricanes and typically run between 1-5 percent of a home’s value, though they can go as high as 10 percent. In some coastal areas with high wind risk, insurers may require hurricane deductibles of 5 percent or higher, according to the III.

A standard homeowners deductible for a home that’s insured for $300,000 is $500. A 5 percent hurricane deductible equates to $15,000 for the same house, requiring the homeowner to pay that much before insurance would pay for more repairs.

In some states, policyholders have an option to pay a higher premium for a traditional deductible. However, this option may not be offered in high-risk coastal areas, making the percentage deductible mandatory, according to the III.

It must be a named hurricane

For the hurricane deductible to apply, a storm must be officially named a hurricane before it hits land. Superstorm Sandy wasn’t technically a hurricane because it didn’t have sustained winds of 75 mph to qualify as a hurricane when it hit the East Coast.

If the storm isn’t named as a hurricane — as the National Weather Service does for hurricanes — then the hurricane deductible won’t be required to be paid by affected homeowners.

The NWS downgraded Sandy from a hurricane just hours before landfall — which turned out to be a good thing because homeowners then didn’t have to pay the hurricane insurance deductibles.

Some homeowners, however, had to pay a similar percentage-based “windstorm deductible” after Sandy that applies whether there’s a hurricane declaration or not.

Even though Sandy wasn’t officially listed as a hurricane, it was still a “named” weather event as Superstorm Sandy and could be a “trigger” selected by an insurance company to require the hurricane deductible be paid by the policyholder. Eight states and the District of Columbia issued decrees that hurricane deductibles couldn’t be applied for damage related to Sandy.

Without being named a hurricane, damage could be covered by standard homeowners insurance, or through extra insurance such as flood insurance