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Old 04-11-2015, 03:27 PM
 
Location: Indiana
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I was wondering if folks who live in tornado-land have to pay extra for coverage caused by tornadoes? I am in hurricane-land and homeowners' insurance is outrageous!
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Old 04-11-2015, 05:03 PM
 
Location: Bloomington IN
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I don't know if it's that much extra, and certainly doesn't cost what it does in places like Florida.
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Old 04-11-2015, 07:14 PM
 
Location: Fishers, IN
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Tornado damage is covered under normal HO policies. Flood damage is not, however.
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Old 04-12-2015, 05:23 AM
 
Location: Denver, CO
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Having been born in Mobile, Alabama, as well as having spent 30 years in the insurance field as an underwriter/rate maker/compliance officer I do have some concept of what the OP is asking.

Part of the reason for the much higher premiums on the coast compared to tornado alley is the width of the storm. A hurricane averages about a 100 mile diameter of winds at their highest force, but may average another 200-300 miles diameter for gale force winds.

The Average tornado is 50 yards wide, though they tend to be bigger in Tornado Alley. The largest tornado ever recorded in Tornado Alley, or anywhere else for that matter, was the Hallam, Nebraska tornado which was 2.5 miles wide.

The potential for damage is simply much greater for hurricanes.

Insurance companies have historically loaded their homeowner rates with a "catastrophe" factor. They literally exclude catastrophes from their rates first. Then average all catastrophe losses over a twenty year period. That average is divided by all the homes in the affected area and a "load" is put on the base rates. This mediates the impact of a single bad year by floating losses over a number of years.

BUT--that said, here is a more sobering thought for everyone. Because catastrophes are trending up in terms of overall damage, some insurance companies are toying with the idea of using a ten year spread. That would put the last ten years which were worse than the previous ten years in one "load." It will really spike rates, not just for those on the coast but everywhere.

You ask why that is? Because insurance companies purchase coverage from each other. It's called reinsurance. So a medium sized company might decide it can handle 50 million dollars in claims, but would need insurance for more than that. They purchase catastrophe coverage from other insurance companies--some who may not even write insurance on the Gulf coast. If those reinsurors get hit with losses from the medium sized company--they pass the costs onto their midwest insurance companies. So in one sense, a disaster anywhere eventually works into everyone's insurance rates to one degree or another.

I've been retired for 15 years now, but the principles remain. And the increasing severity in hurricanes/tornadoes/wildfires/snowstorms has had me telling my wife that we are in for some astonishing rate increases in the next three to five years. People are going to be forced to accept ever higher deductibles to make coverage affordable. I've been carrying a $1000 deductible on a RENTER's policy for years now.

By the way, one poster mentioned that flood is not covered--and it isn't. But in the insurance business we had a saying that, "Flood may not be covered, but the fire following is," if you get my drift.
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Old 04-12-2015, 05:50 AM
 
Location: Indiana
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I understand about the flood insurance.....it is a national insurance?
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Old 04-12-2015, 07:06 AM
 
Location: Fishers, IN
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Quote:
Originally Posted by popcorn247 View Post
I understand about the flood insurance.....it is a national insurance?

https://www.floodsmart.gov/floodsmart/
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Old 06-06-2015, 02:40 PM
 
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Your premium will depend on how many claims have been paid in your area and the amount paid out. Insurance Companies have to keep enough for future claims or they can not do business. More claims equal higher premiums for everyone.
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