Insurance should be a critical component when Natural Disaster affects daily life and American’s business. Specially in this year where extreme weather went from surprising snowfalls, floods, and dust clouds followed one another as the seasons changed.
Over the last several decades, many severe disasters have exposed Insurance needs to face natural disasters in changing markets. These catastrophes are changing the rules of the insurance game on a global scale. According to Claims Journal, the province of Henan in Central China has been sieged by floods during the first quarter of 2021. The outcome of this scenario was a new Insurance Coverage developed only to face natural disasters and ensure safety for the affected community within each municipality.
Another example is in Germany. According to Reuters, Germany’s insurance industry is facing the biggest number of claims from storms, floods, heavy rain and hail since 2013. The government developed a series of programs in order to make insurance available to every person who needs it.
This example shows how Disaster Insurance is necessary because of climate change. Faced with the increasing housing development in high-risk areas, how do we ensure that people have comprehensive and affordable insurance? In this article, we will present the best solutions to this global problem.
What is the best insurance to face natural disasters?
Facing natural catastrophes is difficult. Insurance provides a safety net for those affected, giving them the chance to face damages.
In this context, is important to have the correct insurance for each potential risk situation. Expert researchers at the Insurance Information Institute define that a Natural Disaster happens when:
- The natural event causes $25 million or more in insured property losses.
- It results in 10 deaths, or 50 people injured.
- The disaster generates 2,000 claims of homes and structures damaged.
Once an occurrence becomes a natural disaster, such as the floods in China and Germany, insurance kicks in to attend the claims that follow.
What are the insurance policies suited for natural disasters?
It is a hot topic for discussion. The usual way to handle this policy is to add endorsements to homeowners’ insurance. But this process has proven not to be enough.
Moreover, even in cases with “all perils policies”, there are some natural disasters that simply not covered. The reasons are primarily connected to damages exceeding the coverage of a homeowner’s policy.
So, what type of policy is ideal to cover Natural Disasters? According to the financial website Investopedia, the policy that fits best to these types of events is called “Catastrophe Insurance”. This policy covers different types of damaging situations caused by natural disasters. The most common ones are:
- Tornadoes and tropical storms.
- Earthquakes.
- Windstorms.
- Hailstorms.
- Fires and Wildfires.
- Floods.
- Tsunamis.
- Volcanoes.
It is important to consider that the Catastrophe Insurance is a different type of coverage from a business standpoint than commercial property insurance. In property and casualty coverage, it is difficult to make an accurate estimate of how much damage there could be on different scenarios and the total costs for the amount of claims that are going to be filed.
Also, a Special Catastrophe Insurance is available for specific natural disasters. The more general ones are flood insurance, storm insurance for hurricanes and tornadoes, earthquake insurance, and volcano insurance to cover more specific situations.
Catastrophe Insurance as a Natural Disaster solution
In conclusion, catastrophe insurance is available to cover the damage originated in natural disasters, climate change or even by man-made events.
Catastrophe insurance is often confused with “hazard insurance”. However, hazard insurance usually reflects the proverbial “acts of God” events like volcano eruptions, lightning, tornadoes, etc. Hazard insurance may also refer to the section of a general homeowner’s policy that covers these natural events.
In contrast, catastrophe insurance refers to more far-reaching coverage, applying to man-made disasters as well as natural ones. It also refers to a standalone policy that is separate from regular homeowner’s insurance.
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