Weather hazards play an oversized part in determining the cost of home insurance for most Americans. These natural threats vary in power and frequency by region.
In Iowa, the most destructive and costly weather events fall under the family of storms including thunderstorms, hailstorms, and straight-line windstorms called derechos. The unpredictably fast movement of derechos puts them at the top of the list of most damaging weather events in the state.
When are these storms at their worst in Iowa?
Convective-type storms including thunderstorms, hailstorms, and derechos occur most frequently in Iowa from April through mid-August. The spring and summer months also bring the most powerful storms of the year for this midwestern state.
What other natural threats affect insurance prices?
Also driving notable changes in insurance costs behind the windstorms group are flooding and drought. While these perils may not bring the same level of energetic damage, their impacts cannot be discounted. When flood or drought are a regular occurrence, the risk rating for the area must be increased, and this must take insurance prices up with it.
Tornadoes fall in behind the hazards above as the fourth most impactful weather type based on recent weather data. While these dangerous funnel clouds are often sighted more frequently than the other listed threats, the damage left behind is more localized and generally less expensive to recover from.
How do these hazards affect Iowa's insurance bills?
As weather patterns change and the Midwest sees increasing amounts of extreme storm activity, carriers look to balance the risk they carry by raising their rates. The costs of maintaining and using a home insurance policy are typically passed on to homeowners in two parts: the premium and the deductible.
Premium - This is the flat fee bill you pay to buy an insurance policy and then on a recurring schedule to maintain your coverage. Premiums are often paid monthly or annually.
Deductible - This is the amount you’ll owe if you make a claim on your policy. This amount is ‘deducted’ from the total amount your policy pays out; you are basically covering the ‘first dollar’ that’s due to get work started making the needed repairs or replacements.
Historically, the most frequently used option that insurance providers had to recover their costs for higher-risk coverage was an increase across the board to home customer premiums.
Raising the flat fee of a policy’s deductible could offer the carrier more leeway in continuing to insure higher-risk homes in areas like Iowa. More likely, though, insurers operating in the state are including carved-out additional deductibles specific to one or two hazards each.
Percentage deductibles for perils such as wind & hail allow more precision in pricing for areas where a specific storm type– windstorms with hail, for example–is the single biggest threat to home safety in the region.
What else can make it difficult to get home insurance in Iowa?
There is a broad range of options for home coverage on the open marketplace in Iowa. With some comparison shopping and by asking a few questions of your insurance agent, homeowners should be able to find multiple carriers able to sell them the coverage they need in Iowa.
Unfortunately, home insurance availability is not an absolute certainty. Some homeowners may be rejected by one or more carrier for a number of reasons. If an Iowan family finds themselves ineligible for coverage by the standard carriers, the market of last resort will still be an option.
As the name suggests, an insurer of last resort is a state-regulated insurer that is licensed to provide involuntary coverage, often called a FAIR Plan, to meet the minimum requirements of their lender to keep the property protected at the level required by their mortgage holder. This coverage is generally not as comprehensive as other policies, and the prices are not the lowest, but it does mean that the home is insured, at least on a basic level.
Gray is the Senior Content Specialist at Sola Insurance, working with the Sales and Marketing teams to provide helpful, valuable content for homeowners and agents. Gray has worked previously in finance, logistics, and advertising.
