In May 2011, the deadliest U.S. tornado in at least half a century ripped through Joplin, Missouri. The powerful twister killed 158 people, injured more than 1,100, damaged or destroyed 7,500 homes and triggered nearly $2.2 billion in property insurance claims.
All of that death and destruction happened in less than 40 minutes.
To be sure, the Joplin disaster is an extreme example of the toll that a tornado can exact. But it’s far from the only example, as roughly 1,000 tornadoes touch down in the U.S. every year, causing billions of dollars worth of damage. In 2015, insured losses from tornadoes totaled nearly $10 billion.
And while tornadoes typically are confined to the central U.S., in places like Joplin, they’ve been reported in all 50 states. So regardless of whether you’re in Missouri or Maine, what will your homeowners or renters insurance policy cover if a tornado strikes your residence?
Assessing your tornado damage coverage
If you have homeowners insurance, your policy generally will cover damage caused by a tornado. If you have renters insurance, that policy will cover damage to your belongings, but the landlord’s property insurance will cover structural damage.
If water damages your residence during a tornado, your policy may or may not cover that. Damage caused by flooding isn’t covered by a homeowners or renters policy. However, if rainwater enters your home through a roof damaged by wind, your policy might kick into effect, but only if your policy includes wind coverage, according to Allstate.
Furthermore, a homeowners or renters policy pays for living expenses — such as hotel bills and restaurant meals — if you’re unable to live in your home if it’s been damaged or destroyed in a tornado, says Loretta Worters, a spokeswoman for the Insurance Information Institute. This coverage is separate from the money available to repair or rebuild your home, she says.
Trusted Choice, a network of independent insurance agents, emphasizes that you should consider insurance beyond what routinely is covered in a policy if your home is full of expensive electronics, artwork, collectibles or other high-value items. This extra coverage can come in the form of an endorsement, a floater or a rider — which essentially are the same thing — or by raising the dollar limits of your policy’s coverage.
Choosing the right policy
To minimize the financial damage of a tornado, Travis Biggert, chief sales officer at HUB International Mid-America, an insurance brokerage, says it’s critical to add something known as replacement cost value (RCV) coverage, which covers the cost of repairing or replacing items at their current cost. In the case of a homeowner, you’ll want to buy this extra coverage for the structure, including the roof, as well as the contents.
"Some homeowners or renters purchase what is called actual cash value (ACV) coverage, which saves them up-front premium dollars, but costs them dearly if and when there is a claim," Biggert says. Actual cash value pays the current, depreciated value of an item that was damaged instead of the cost of replacing the damaged item with a new one.
The Texas Department of Insurance offers this example:
Let’s say you bought a sofa last year for $2,000. If you have ACV coverage, the insurance company may pay you only $1,500, since that’s how much the sofa is worth now. But if you have RCV coverage, the insurance company may fork over $2,100, as that’s how much the company figures it would cost to buy a similar sofa now.
Biggert adds, "When they suffer a loss, their stuff is depreciated, often to such a level where it can feel like a garage sale."
Trusted Choice recommends that before disaster strikes, you should take an inventory of your belongings and update the list every year. In addition, experts suggest taking photos or video of the contents of your home in case you need to file an insurance claim.