Block on Trump's Asylum Ban Upheld by Supreme Court
Recent outbreaks of deadly, destructive tornadoes raise questions about insurance coverage: How does tornado insurance work, and why do homeowners often get stuck paying most of their tornado repair bills?
Most homeowner, business, and auto insurance policies include tornadoes as part of standard coverage for wind damage and severe weather, according to the Insurance Information Institute. In general, homeowner's and renter's insurance covers property damage from tornadoes.
The type of insurance policy, and the amount of insurance purchased, affect how much an insurance company will pay for tornado damage. But even with tornado insurance, tornado victims will likely have to dig deep into their own pockets to rebuild.
That’s because nearly two-thirds — about 64% — of U.S. homes are undervalued for insurance purposes, according to a 2008 study cited in USA Today.
While housing values have declined in the past five years, building costs have shot up in most areas, insurance experts told USA Today. “People will not have enough money to rebuild their homes,” one insurance agent said.
Renters may be especially hard-hit, since only 43% have renter’s insurance, according to the Insurance Research Council.
And tornado victims may not be able to count on federal aid to make up the difference. Though a federal disaster declaration allows un- and under-insured victims to get as much as $30,000 in federal aid, the average payouts are much lower, USA Today reports.
If this makes you concerned, perhaps it’s time to take another look at your insurance policies and revalue your assets.
Damage from deadly tornado outbreaks in 2011 resulted in huge losses for insurance companies. That’s one reason the cost of property insurance, which includes tornado insurance, is on the rise, Reuters reports.