This week's deadly tornado in Moore, Okla., is fixing to expand its reach.
While insurance companies don't try to raise rates solely on the basis of a single storm or disaster, a series of disasters can push them to seek higher rates where the events took place. The past five years have seen numerous significant tornadoes, and with the Moore tornado coming shortly after several other serious ones in Texas and elsewhere, experts say several states could feel financial pain.
Bob Hunter, director of insurance for the Consumer Federation of America, expects the national impact on insurance rates to be very limited. "But localized areas like Oklahoma could see 15 or 20 percent," he said, along with other states frequently hit with tornadoes, such as Texas, Kansas, and possibly Mississippi.
[Read more: Oklahoma Twister Among Five Costliest In History ]
Texas and Oklahoma already are among the most expensive states for homeowner's insurance, according to the National Association of Insurance Commissioners.
[Read more: Why Insurers May Be Unprepared for the Next Big Storm ]
Robert Hartwig, president of the Insurance Information Institute, said that insurance companies operating in Oklahoma and other tornado-prone states have long factored that risk into their rates. Pointing to the Moore tornado, he said, "losses of that magnitude are anticipated in states like Oklahoma and Texas." As for potentially large insurance rate hikes in those states, he said, "if there are increases of that magnitude, I would consider those more anecdotal than the rule."
Still, even if insurance rates don't rise right away, certain features in your policy may change and leave you with less coverage than you think, according to Hunter. He says companies are already limiting how much they will pay even on a policy that promises to pay the cost of replacing some or all of a home.
"Some companies give you a little bit of leeway," he said, paying up to 120 percent of the cost to rebuild - but a lot of companies pay less. That's especially challenging if you are filing a claim after a disaster like Monday's tornado, since prices for building supplies will probably increase due to a surge in demand.
With some policies, you may not even receive the replacement value of whatever you are rebuilding. Some insurers only pay what's called "actual cash value," which represents the depreciated value of whatever you are trying to replace. This payment method is often applied to roofs, especially those over a certain age.
How can you keep your insurance costs in check and still get the coverage you need?
In a word, shop.
A study by Deloitte found that 27 percent of consumers never shop around for homeowner's insurance, and 45 percent have never changed carriers.
"They're almost surely paying too much," Hunter said. The Internet makes price comparisons fairly straightforward, and you may be able to save a bundle if you look around the next time your policy is up for renewal.
Whatever policy you choose, make sure you read the fine print. And don't be afraid to ask what terms mean if you find them confusing. Once you fully understand the policy, it may be possible to curb your costs by dropping some provisions you don't need and beefing up others that offer less than you want.
Insurance is complicated, and the wording in policies can be opaque. But with a little homework you may well be able to minimize the "tornado effect," and more.
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