All of us witnessed what a massive disaster Hurricane Sandy was. There was severe damage to property, life, vehicles and other assets and New York City came to a standstill. Natural disasters strike without any forewarning.
To safeguard yourself and your family against such calamities, you should consider taking adequate insurance against such perils. A recent study has revealed that even Governments can reduce their burden of loss arising out of catastrophes through insurance.
ACTS OF GOD
Natural calamities such as earthquake, flood, storm, cyclone (also known as ‘Acts of God’) can be covered through property insurance policies. There are various policies which cover such perils either as an inbuilt cover or as an add-on cover.
The standard Fire and Special Perils policy covers perils such as storm, tempest, flood, inundation as an inbuilt cover, while earthquake can be covered as an add-on cover.
Acts of God perils usually attract higher deductibles vis a vis other normal perils, attributed to potential of colossal damage which may result from occurrence of this sort of peril.
WHAT IS COVERED
The cover is provided up to the value of property in terms of reinstatement or its replacement cost.
There are consequential loss policies which cover financial losses arising out of business interruption consequent to such natural perils.
Premium rates depend on several factors such as physical location of the property insured, extent of cover, nature of occupancy (whether Industrial / Non Industrial / Residential). Premium rates also depend on the previous claims out in by the insured.
Generally, under property insurance policies a compulsory deductible called ‘excess’ is applicable which is mentioned in the policy document wherein a certain percentage is deducted from the claim amount.
HOW TO BUY
It is vital to conduct adequate research and also read the fine print in the policy document before making a purchase.
If you find some items in the exclusion list but want those in your policy, speak with your insurer and see if you can include the same by paying an extra premium.
The natural perils usually available as add-on cover are provided only if you opt for it by paying additional premium. In normal circumstances, there is no waiting period for these covers but insurers could impose restrictions on new policies once an alert on impending peril is issued.
CLAIMS
The moment of truth in insurance is when you register for a claim. It is mandatory to inform your agent or insurer about the damage and the losses incurred.
As the first step, you need to submit a claim in writing giving the details of damages, other insurances on the same property and their estimated values within 15 days of the occurrence of such loss.
A claim for loss by catastrophes must satisfy certain conditions as mentioned in the policy document.
The two recent calamities that took place in New York and Chennai have been an eye-opener for residents in these localities.
The adverse effects of these calamities have highlighted an urgent need for the local residents to take necessary steps to alleviate the risk of large losses, should a natural disaster strike again. The most effective way to bring down the losses is to opt for an insurance cover, be it before the disaster strikes, during a disaster or rehabilitation after a disaster.
(The author is President Insurance, Tata AIG General Insurance
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