The recent tornadoes to hit the midwest have cut a swath of damage and devastation. The storms hit populated areas including Dayton Ohio, and Kansas City. Over 100 tornados have hit the midwest in 12 straight days. Federal government weather forecasters logged preliminary reports of more than 500 tornadoes in a 30-day period.

These storms touch down quickly and offer little time to escape, especially in heavily populated areas where you don’t have a clear line of sight of the sky. Some people become complacent and ignore the severe weather alerts that are broadcast onto cell phones using the emergency preparedness system. 

Even areas that are not known for tornado activity like New Jersey and Staten Island in the heart of New York City had tornado warnings this week. They can truly strike anywhere. Last summer, four tornadoes narrowly missed our home in Ottawa Canada. 

A particularly destructive storm splintered homes, ripped up trees and downed power lines southwest of Kansas City. 

One of our regular listeners to the show had a tornado damage their car, uproot trees, and destroy multiples homes in the neighborhood. Their own home fortunately was spared a direct hit and the impact was a lengthy loss of electricity. 

Every year, homeowners dutifully pay their insurance premium, expecting that they will be covered against major risks like tornadoes. 

Insurance companies are not in the habit of losing money. So it’s important to read your policy carefully.

Policies come in two major forms. There are named peril policies and broad form policies. In a named peril policy, you are insured against the specific risks that are named in the policy. These usually include policy limits both in terms of the scope of coverage provided and dollar limits for each named peril. 

If your risk isn’t specifically insured you’re probably not covered. 

The second type of policy is broad form. This basically covers everything and the exclusions are named specifically. Broad form policies generally cover more. But either way you still want to read the policy and ensure that you are properly covered. 

Tornadoes represent several major risks. These include wind, hail, flooding, fire.

You might discover that the insurance company will attempt to assess which damage was caused by wind and which was caused by water. Water damage is the number one category for insurance claims and is therefore subject to the greatest limitations. 

You may be able to purchase a separate flood insurance policy through the National Flood Insurance Program. Only 12% of homes in the US actually have flood insurance coverage. The remaining 88% are making the bet that they will not experience that risk, or they mistakenly think that they are covered. 

However, if rain water gets into your home because your roof was damaged by wind, you may find that your insurance offers some protection — but only if your policy includes coverage for wind. Some policies that offer coverage for wind, list named storms as being excluded. For example if a storm is given a name like, say, Hurricane Andrew, that would be excluded from the policy coverage. Tornadoes are so short lived that they are not named storms. By the time they could be given a name, the storm is over.  

It’s really important to read the policy, not just the one page term sheet that your insurance broker give you.