While there are hundreds of forms of insurance, few evoke reactions as passionate, or in many cases as desperate, as disaster insurance. A form of insurance granting homeowners financial relief and an important element of security from the effects of natural disasters, this form of insurance provides a level of security for homeowners and tenants in the event of a flood, earthquake, or other disaster.
Generally speaking, it prevents against financial strain from property damage, or in many cases an entire property's elimination, as is frequently the case in natural disasters. Homeowners caught in a flood or earthquake may experience hundreds of thousands of dollars in damage to their homes – a disaster insurance policy can cover the expenses associated with repairing all of this damage.
However, the average disaster insurance policy goes above and beyond that, protecting not just the home itself but the majority of the possessions inside of it. From laptop computers to family items, heirlooms, and antiques, hundreds of home items are protected under most disaster insurance plans. Just as home and contents insurance protects against theft and burglary, disasters insurance secures homeowners against Mother Nature.
In this brief guide, we'll look at some of the situations in which disaster insurance is most valuable, and also at some common pitfalls for people aiming to purchase disaster insurance for their house, commercial property, or apartment. As with any form of insurance, disaster insurance can be both a valuable asset or an expensive pain, dependent largely on the type of policy and its coverage value.
But before we do this, let's look at the most common terms applied to disaster insurance policies, as this aspect of disaster insurance has featured prominently in domestic and international news during the last few months. With natural disasters occurring around the world – be it a flood, earthquake, or tsunami – it's important to remember just what we are and aren't protected against in a disaster.
The vast majority of disaster insurance policies are tailored to suit residents of the area that they're offering coverage for, although not all are written as such. Individuals with disaster insurance from a larger, nationwide chain may find that they're being offered coverage for only a slim set of issues, many of which are unlikely to affect them due to climate, geography, and a number of other factors.
The end result of this is negative in two ways. The first is that, by paying for coverage in situations that are unlikely, if not impossible, to occur, the policyholder decreases the overall value while still paying a relatively high insurance premium. In simple terms, this means that the disaster insurance policy holder is paying for services that they'll never need, often in place of ones that they will.
The second end result is slightly more devastating – the policyholder, by purchasing a large policy in place of a more specialized one, may be missing out on coverage that's quite important to them. Ask a number of Australian Queensland residents about their disaster insurance and you're likely to hear a response that mirrors this, as many were left without coverage due to a contract technicality.
With thousands of homes destroyed by flooding, Queensland residents believed that they were safe due to their 'flash flood' protection insurance. Unfortunately, their floods were 'flash' floods as such, instead river-based flooding. As a result, few were able to claim any real support from their policies nor retrieve any funds from their insurers, despite holding policies and making regular payments.
This is not the type of situation that you want to end up in with a disaster insurance policy. As such, it's absolutely essential that you double and triple-check your specific insurance policy to ensure it's built with your needs in mind. You may save a few dollars monthly with a more general policy, but it's a risky move – that small saving could result in major losses in the even of a major disaster.
Generally speaking, these disaster insurance contracts are best negotiated and navigated with the help of an insurance agent, preferably one that specializes in home and disaster insurance. Risks, particularly contractual ones such as these, are rare, but they remain an issue. By speaking with a disaster insurance agent before purchasing, you can effectively minimize these potential risks.
Beyond this, there's also the question of what to cover as part of your disaster insurance. Many people choose to insure only their home itself, but this is also a risky move. When a big disaster occurs, it's just as likely that your contents will be damaged too. Prevent against all damage by picking a comprehensive insurance package, not just an inexpensive one that covers your home.
This often means purchasing coverage for other items, such as your vehicle, commercial assets or real estate holdings, and even ensuring that co-operative investments are secured against disasters and other risks. These aren't minor additions to a policy, nor are they non-concerns – all are fairly expensive to replace or repair, and deserve the attention and policy that your home itself receives.
While disaster insurance can strike up an emotional side that few people want to encounter during a big investment, it remains an important investment. From high-risk regions to the one-off chance of something occurring, it's important that you and your home stays safe. With disaster insurance, you needn't worry about your home or your mortgage, even in the direst of potential circumstances.