Louisiana Homeowners Insurance

Louisiana homeowners face unique insurance challenges due to the state's significant exposure to hurricanes, floods, and severe weather. Understanding Louisiana-specific homeowners insurance requirements is essential for property & casualty producers.

Louisiana's Unique Risk Profile

Why Louisiana Is Different

Louisiana homeowners face extraordinary natural disaster risks:

Hurricane Risk:

• Louisiana is one of the most hurricane-prone states in the U.S.
• Major hurricanes strike Louisiana regularly (Katrina 2005, Gustav 2008, Isaac 2012, Laura 2020, Ida 2021)
• Coastal areas face Category 3, 4, and 5 hurricane threats
• Hurricane season: June 1 - November 30 annually

Flood Risk:

• Much of Louisiana is at or below sea level
• Louisiana leads the nation in NFIP claims (over $20 billion since 1968)
• Approximately 419,000 NFIP policies in Louisiana (9% of all U.S. policies)
• Flood risk exists throughout Louisiana, not just coastal areas

Coastal Erosion:

• Louisiana loses approximately 75 square kilometers of coast annually
• Land loss increases flood and storm surge risk
• Affects property values and insurability

Market Challenges:

• Many national insurers have reduced Louisiana exposure
• Limited voluntary market capacity
• Higher premiums reflect increased risk
• Growing reliance on Louisiana Citizens

Standard Homeowners Policy in Louisiana

HO-3 (Special Form) - Most Common

The HO-3 is the most common homeowners policy in Louisiana:

Coverage A - Dwelling

• Covers the home structure
• "All risk" (open perils) coverage
• Covers wind and hail damage
• Typically EXCLUDES flood damage
• May have separate hurricane/windstorm deductibles

Coverage B - Other Structures

• Detached structures (garages, sheds, fences)
• Typically 10% of Coverage A
• Same perils as dwelling coverage

Coverage C - Personal Property

• Personal belongings and contents
• Named perils coverage on HO-3
• Typically 50-70% of Coverage A
• Subject to special limits for certain items

Coverage D - Loss of Use (Additional Living Expenses)

• Temporary housing if home uninhabitable
• Typically 20-30% of Coverage A
• Critical after hurricanes

Coverage E - Personal Liability

• Liability for injuries to others
• Typically $100,000 to $500,000
• No deductible applies

Coverage F - Medical Payments to Others

• Medical expenses for injured guests
• Typically $1,000 to $5,000
• No deductible applies

Exam Tip: The standard HO-3 covers wind damage from hurricanes but EXCLUDES flood damage. This is a critical distinction in Louisiana where hurricane damage involves both wind and water.

Hurricane and Windstorm Coverage

Hurricane (Named Storm) Deductibles

Louisiana is one of 19 states with special hurricane deductibles (also called "named storm deductibles" or "percentage deductibles"):

Key Features:

• Percentage-Based: 2% to 5% of dwelling coverage (Coverage A)
• High Dollar Amount: Much larger than standard deductible
• Annual Application: Applies once per year, not per storm
• Trigger: When National Hurricane Center names a storm

How Hurricane Deductibles Work

Example Calculation:

When Hurricane Deductible Applies:

1. National Hurricane Center names a tropical storm or hurricane
2. Named storm affects Louisiana
3. Homeowner files claim for wind or storm damage
4. Hurricane deductible applies (instead of standard deductible)
5. Homeowner pays percentage deductible; insurer pays remainder

Annual Application:

• Hurricane deductible applies once per year, not once per storm
• If multiple named storms hit in same year, first storm triggers deductible
• Subsequent named storms in same year use standard deductible
• Annual cycle typically runs January 1 - December 31

Exam Tip: Louisiana hurricane deductibles range from 2% to 5% of dwelling coverage and apply ONCE PER YEAR when a named storm causes damage. Know that these are much higher than standard deductibles.

Trigger Mechanisms

Louisiana insurers use specific triggers for hurricane deductibles:

Named Storm Trigger:

• Most common trigger in Louisiana
• Activated when National Hurricane Center names a tropical storm or hurricane
• Applies when named storm affects Louisiana
• Includes tropical storms and hurricanes (all categories)

Time Period Trigger:

• Some policies use time-based triggers
• Example: Deductible applies 12 hours before through 12 hours after storm
• Less common in Louisiana

Geographic Trigger:

• Some policies trigger when storm center within certain distance
• Example: Within 100 miles of insured property
• Varies by insurer

Wind vs. Flood Damage

Critical Distinction:

Louisiana's Wind vs. Water Challenge:

After Hurricane Katrina (2005), determining whether damage was caused by wind or water became highly contentious:

• Wind damage: Covered by homeowners insurance
• Water damage from storm surge/flooding: Covered only by flood insurance
• Many Louisiana homeowners had wind coverage but not flood insurance
• Disputes led to litigation and regulatory changes

Current Requirements:

• Insurers must clearly disclose wind vs. flood coverage
• Producers must explain the distinction
• Consumers must be informed flood insurance is separate
• Many Louisiana lenders require both homeowners and flood insurance

Exam Tip: Wind damage from hurricanes is covered by standard homeowners policies, but flood damage (including storm surge) requires separate flood insurance. This distinction is critical in Louisiana and appears frequently on exams.

Windstorm Coverage Enhancements

Additional Coverage Options

Louisiana homeowners can enhance windstorm coverage:

Higher Dwelling Coverage:

• Increase Coverage A to replacement cost
• Include code upgrade coverage
• Add extended replacement cost (125%, 150%)

Lower Hurricane Deductibles:

• Choose lower percentage deductible (costs more in premium)
• Some policies allow flat dollar hurricane deductible
• Consider buyback options

Wind Mitigation Discounts:

• Hurricane shutters or impact-resistant windows: 10-15% discount
• Reinforced roof covering: 5-10% discount
• Roof-to-wall connection improvements: 5-10% discount
• Secondary water resistance: 3-5% discount
• Opening protection (doors/windows): 5-10% discount

Louisiana offers Fortify Homes Program providing grants for:

• Roof strengthening
• Wind mitigation improvements
• Reduced insurance costs through discounts

Exam Tip: Louisiana encourages wind mitigation through discounts and the Fortify Homes Program. Know that wind mitigation improvements can reduce premiums by 10-30%.

Louisiana Citizens Property Insurance Corporation

Role as Insurer of Last Resort

Louisiana Citizens provides property insurance when voluntary market coverage is unavailable:

Eligibility Requirements

To qualify for Louisiana Citizens coverage:

1. Unable to Obtain Voluntary Coverage:

   • Must demonstrate declination or non-renewal from voluntary market
   • Typically requires proof of rejection from at least one insurer
   • High-risk properties often eligible

2. Property Requirements:

   • Property must be insurable
   • Must meet minimum standards
   • Cannot have pre-existing significant damage
   • Must be in acceptable condition

3. Location:

   • Available throughout Louisiana
   • Coastal properties common
   • High-risk flood zones
   • Areas affected by hurricanes

Coverage Provided by Louisiana Citizens

Pricing and Requirements

Rate Structure:

• Must be more expensive than voluntary market
• Rates set to cover expected losses
• Actuarially sound rates required
• Reflect high-risk nature

Policy Limits:

• Dwelling coverage up to applicable limits
• Hurricane deductibles apply (typically 2-5%)
• Standard deductibles for non-hurricane claims
• Similar structure to voluntary market policies

Recent Changes (2026):

• 10% Surcharge Waiver: Effective January 1, 2026, Louisiana Citizens waived the 10% surcharge for three years
• Hurricane Assessment Eliminated: The 1.36% assessment to repay Katrina/Rita bonds ended in April 2025
• Premium Relief: Temporary relief for policyholders
• Depopulation Efforts: Louisiana Citizens working to transition policies to voluntary market

Depopulation and Takeout Programs

Louisiana Citizens works to move policies back to voluntary market:

Depopulation:

• Voluntary market insurers can assume Citizens policies
• Policyholders given option to move
• Reduces Citizens\ exposure
• Increases voluntary market capacity

Takeout Programs:

• Insurers offer to assume blocks of Citizens policies
• Must offer comparable or better coverage
• Policyholders can accept or remain with Citizens
• Helps stabilize insurance market

Exam Tip: Louisiana Citizens is the insurer of last resort and must be more expensive than voluntary market. Know about the recent 10% surcharge waiver and elimination of the 1.36% assessment.