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Natural Disasters, Insurance and Real Estate Investing

Tornado Natural Disasters

I am often asked about the potential dangers of hurricanes, tornadoes, and other natural disasters in regards to investing in single-family rental homes.

Every state/city in the U.S. is subject to (some type of) natural disasters that bring various risks (with few exceptions). Along the coasts, hurricanes happen, in the middle of the country, there are tornadoes, in other states, we have wildfires, earthquakes and more.

How insurance handles property damage when natural disasters hit

Pay attention to is how insurance handles damage from such events. For example, despite hurricanes being more frequent in recent years, their coverage by insurance is still quite good, so that minimizes risk greatly. We are always here to help you assess the fine print, too.

Tornadoes are more narrow in scope and thus usually don’t even hit homes in the major metropolitan areas at all, despite striking parameters. For example, Oklahoma City does have some tornadoes; over nearly 15 years, our real estate investors bought over 1,200 single-family homes and not one home purchased has been hit by this natural disaster.

Joe Pryor, our main Oklahoma City broker, has not seen any homes hit by a tornado that he knows, and he has lived there for decades. Even if that were to happen, insurance coverage is very good. The insurance premiums in Oklahoma City are quite low, indicating that the insurance companies themselves must consider the risk to be minimal.

Questions about tornadoes and hurricanes

The irony is that most questions about tornadoes and hurricanes come from people who live in the San Francisco or Los Angeles areas. Now, these are areas with real risks – earthquakes – which are poorly insured. In fact, one would need to be pretty brave to own an expensive home in the San Francisco Bay Area, where earthquakes can cause severe (if infrequent) damage, while earthquake insurance is usually very incomplete, with relatively poor coverage.

Feel free to post questions about your concerns and let’s discuss. What concerns you may just concern others. You may also email me at info@icgre.com.

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