Recent Tornadoes: States Hit Hardest Have Among the Nation’s Highest Rates of Homes Without Hazard Insurance

According to a recent article from Insurance Journal, “Many of the states hammered by what’s already the deadliest year for tornadoes in more than half a century have among the nation’s highest rates of homes without hazard insurance despite being among the most twister-prone, data analyzed by The Associated Press (AP) shows.” According to the article, “that means the regions that most need the insurance are often the exact places that don’t have much of it. It also means many tornado victims may have a hard time getting compensated for their losses, putting more pressure on the federal government to help even though its assistance is limited by law.”

Here are some important facts from the article:

• With more than 450 deaths and billions of dollars in damage in the past month alone, regulators are calling for more education about the importance of homeowners insurance and further efforts to make it affordable and available to all. But whether to buy it is still considered a personal choice and there’s no push to mandate it federally.
• The fallout is on stark display in Mississippi and Arkansas, 2 of the 7 Southern states battered last month by twisters. Mississippi ranks second in the nation for the percentage of homes without insurance covering wind damage yet 4^th on the list of states that have had the most tornadoes touch down in the past five years. Arkansas ranks fourth for uninsured homes and 10^th for being tornado prone, according to the AP’s analysis.
• States with the highest rates of uninsured homeowners also tend to have a higher incidence of homes without mortgages, meaning owners don’t have to answer to banks requiring coverage. The uninsured can turn to aid groups and the deferral government for relief – but often not for full compensation.
• Poverty and an abundance of older homes that can be difficult to insure contribute to high rates of no insurance. In tough economic times, the temptation to forgo insurance is real.
• Many people don’t qualify for insurance if their homes are in high-risk areas, or they have trouble affording a policy to cover wind damage because of high costs associated with home value, aging construction and building codes, Arkansas Insurance Commissioner Jay Bradford said.
• Nationally, roughly 4 percent of owner-occupied homes lack homeowners, or hazard, insurance, according to the latest industry estimates. By the numbers vary substantially by region.
• The South has the highest rate of homes without hazard insurance, at 17.4 percent, according to the AP analysis. This is followed by the Northeast at 12.2 percent, the Midwest at 8.4 percent and the West at 3.3 percent.
• The highest death toll from tornadoes in the past month was in Alabama, which is at the national average for homes without insurance and ranks third for frequency of tornadoes. North Dakota tops the uninsured list and ranks 16^th on the tornado-prone list.

Here are some facts from the analysis done by The AP:

• The AP analyzed data compiled by the Insurance Information Institute and the U.S. Census Bureau. AP relied on 2008 figures because those were the most recent for which comparisons could be made, and it’s unlikely the numbers would have fluctuated much in the past three years, said industry expert Robert P. Hartwig.
• About 30% of owner-occupied homes in Arkansas and Mississippi lack hazard insurance policies, according to the AP analysis, which reviewed data from all 50 states except Florida, where data was incomplete.
• By law, the Federal Emergency Management Agency can provide up to $30,300 in grants for home repairs, rental assistance and other disaster-related losses in residentially declared disaster areas. But that may not cover the cost to rebuild.
• Insured homeowners can still qualify for FEMA aid, but the assistance is reduced by the amount of the insurance settlement.
• Homeowners also may be eligible for low-interest loans from the Small Business Administration (SBA). Unlike the FEMA program, the SBA money must be repaid, and if the loan is over a certain amount the agency will take a lien against the property until the money is repaid.
• FEMA has already registered more than 100,000 individuals and families in the tornado-affected states for assistance and approved tens of millions of dollars for individual assistance to cover temporary housing, home repairs and other needs.
• According to Census data, Mississippi and Arkansas have higher-than-usual rates of homes without mortgages – about 41 percent of owner-occupied homes in Arkansas and 43 percent in Mississippi. The national average is under a third of all owner-occupied homes.

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