3 Things You May Not Know About Your Homeowners Insurance's Tornado Coverage

Devastating tornadoes have already begun pummeling the Midwest, and we can only expect that to get worse in the coming months. Peak tornado season for the upper Midwest is June through July. But southern states typically see the most tornadoes in May or June, according to the National Oceanic & Atmospheric Administration (NOAA).

This makes now a great time for homeowners to review their coverage so they aren't caught off guard if they need to file an insurance claim for tornado damage in the next few months. Here are three things too many homeowners don't realize until it's too late.

1. You may have to pay a separate wind/hail deductible

Most people know that homeowners insurance has a deductible, which is the amount you must pay out of pocket when you file a claim before the insurer will pay anything. But not everyone realizes they could face a separate wind/hail deductible in the event of tornado damage.

These storms can be costly for insurers, so many now require homeowners to pay a higher deductible when filing claims for wind or hail damage. This could be a flat dollar amount or a percentage of the home's value.

Going with a larger deductible generally reduces the policy's premiums, but it can also lead to bigger out-of-pocket costs in the event of a claim. That's why it's important to make sure to save for this in an emergency fund so you're prepared.

2. Actual cash value policies may not help you replace all your damaged or destroyed items

When it comes to protection for personal items, most homeowners insurance policies give policyholders a choice between actual cash value coverage and replacement cost coverage. Actual cash value means the insurer will pay the actual value of the item at the time of the loss. But this can include depreciation. So if the item is no longer worth as much as it was when you first bought it, the insurer will only pay its current, lower value. That could leave you without the money you need to replace all your belongings if they're damaged in a tornado.

Replacement cost coverage, on the other hand, pays whatever is necessary to replace damaged or destroyed items with new versions that are comparable in quality. This provides better protection, but it can also make homeowners insurance more expensive.

It's ultimately up to each homeowner to decide which type of coverage is best for them. But it's a good idea to familiarize yourself with what coverages you have already if you're not sure. Then, you can make changes if you don't think you're adequately protected.

3. Flood damage might not be covered

Not all tornadoes are accompanied by floods, but when this happens, it could create an even bigger nightmare for homeowners. Floods are some of the costliest homeowners insurance claims there are, and as a result, typical homeowners insurance policies don't cover them. If a home is hit by a tornado and a flood, the insurer may pay for the wind damage, but not any damage caused by flooding.

In order to be fully protected, homeowners need to purchase a separate flood insurance policy. These are underwritten by the National Flood Insurance Program. They have their own premiums and deductibles, but they'll reimburse you for flood damage, including damaged personal property. Some lenders actually require homeowners to carry this coverage if they live in an area at high risk for flooding.

Homeowners who have questions about what their policy does and doesn't cover should review their policy terms or reach out to their insurer with questions. It's best to do this before you need to file a claim, rather than afterward. That way, should the worst happen, you'll know exactly what to expect.