Tornado-Hit States Rank High in Uninsured

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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 shows.

That means the regions that most need the insurance are often the 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.

With more than 450 deaths and billions of dollars in damage in the past few 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.

The fallout is on stark display in Mississippi and Arkansas, two of seven Southern states battered in April by twisters. Mississippi ranks second in the nation for the percentage of homes without insurance covering wind damage yet fourth 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 10th for being tornado prone, according to the AP’s analysis.

In tough economic times, the temptation to forgo insurance is real.

Missouri, site of a May 22 tornado outbreak with at least 139 dead, falls somewhere in the middle on hazard insurance despite being the fourth most tornado-prone state. Kansas and Oklahoma, the sites of deadly tornadoes on May 24, also fall in the middle and rank No. 2 and No. 6 on the list of most tornado-prone states.

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 federal 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.

Tammy and Kevin Cudy of Joplin, Mo., dropped their homeowner’s policy, and its $50-a-month premiums, last August after Kevin lost his construction job. They considered reinstating their policy the week before the deadliest single tornado in nearly six decades demolished their five-bedroom home. “That’s why I’m kicking myself right now,” said Tammy Cudy, 47. “The fact that we were thinking about it, that we needed to work our budget around it, it just makes you kind of heart-sick at this point.”

Many people don’t qualify for insurance in high-risk areas, or they have trouble affording a policy because of high costs associated with home value, aging construction and building codes, Arkansas Insurance Commissioner Jay Bradford said.

“The loss ratios on those houses that are insured are generally pretty high,” Bradford said. “They don’t have central heat and air. They are older homes. Sometimes, the plumbing and wiring are not up to standard. The rates are higher, and the coverage is limited.”

Tight finances kept Nancy and Homer Davis from buying a policy on the 80-foot-by-14-foot trailer they purchased eight years ago for $10,000. Homer is on disability and Nancy works part-time at a Lowe’s. One of last month’s twisters lifted their trailer off the ground near Pheba, Miss., smashed it against trees and disgorged it into a ditch.

“I’m trying to figure out, `Where does my money go?’ He’s on disability and I’m working part-time,” said Davis, 51. “It’s just trying to figure out what’s the best way to spend your money. You say to yourself, `As soon as I’m ready, I’m going to get insurance on the house.”‘

Nationally, roughly four percent of owner-occupied homes lack homeowners, or hazard, insurance, according to the latest industry estimates. But 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 and the West at 3.3.

Alabama is at the national average for homes without insurance and ranks third for frequency of tornadoes. North Dakota tops the uninsured list and ranks 16th on the tornado-prone list. Louisiana ranks 11th in both.

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. It’s unlikely the numbers have fluctuated much in the past three years, said Robert P. Hartwig of the III.

About 30 percent 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. In Louisiana, about 17 percent are uninsured. The rate is roughly 10.5 percent in Missouri. Alabama, Georgia, Kentucky and Tennessee all are close to the national average of 4 percent.

Some of the states hit by recent tornadoes have average insurance premiums well above the national average of $791 a year. Louisiana’s average annual premium is $1,155 and Mississippi’s is $980. Alabama’s average premium is $845, as is Minnesota’s. Arkansas’ and Missouri’s are $788, roughly at the national average.

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 presidentially 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.

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.

Mississippi and Arkansas have higher-than-usual rates of homes without mortgages – about 41 percent in Arkansas and 43 percent in Mississippi. The national average is under a third. In many cases, homeowners have inherited their homes and don’t need a mortgage which would require insurance, said Larry Cox, a University of Mississippi professor of insurance and risk management.

“It’s come down from grandparents, great grandparents, and they never bothered to insure it,” Cox said.