Insurance for natural disasters: Points to keep in mind while buying it?

India is a country known for its diverse geography and climate and is highly susceptible to natural disasters such as floods, cyclones, earthquakes, and droughts. These events not only cause immediate devastation but also have long-term impacts on individuals, communities, and the economy. In this context, insurance emerges as a vital tool for financial security and resilience against such disasters.

 

Understanding the role of insurance in disaster management

 

Insurance plays a crucial role in mitigating the financial impact of natural disasters by providing a safety net that helps individuals and businesses recover quickly. Insurance coverage for natural disasters can help tackle the risks through timely financial assistance, enabling individuals to recover from losses without being dependent on savings or taking out a loan. Typically, such policies are designed to cover financial damage to property, crops, vehicles, or businesses.

 

 

Today, most insurers allow policy buyers to customise their coverage based on regional risks. This arrangement makes more sense, as different geographic locations pose different threats. For instance, individuals residing in hilly areas would benefit more from home or property insurance that covers damage from landslides or earthquakes. Alternatively, those living in flood-prone areas will find flood-specific home insurance, motor insurance, or crop insurance more suitable.  Also Read: 8th pay commission: When will it be formed & how govt salary is calculated

 

“Catastrophe insurance covers damage to businesses and residences incurred during a natural calamity. These plans help access financial assistance quickly to tide over losses. Notably, nowadays, most term plans and some travel insurance cover deaths due to natural disasters. However, I recommend finding out more about this clause and any exclusions it may have when seeking a new policy. On the other hand, those with existing coverage should make it a point to review and update it regularly to ensure they are adequately covered against changing risks. The industry should also take a cue from these challenges and tailor more products for different regions and demographics to mitigate climate-related risks,” said Shilpa Arora COO and co-founder of Insurance Samadhan.

 

Key factors to ensure you get appropriate coverage:

 

Verify covered perils: Confirm exactly which natural disasters are covered — floods, earthquakes, cyclones, landslides, etc. Some policies exclude certain events or treat them as add-ons.

 

Exclusions: Carefully read what's excluded. For example, many policies won't cover damage from ‘acts of God’ unless specifically mentioned.

 

Sub-limits: Check if there are caps on specific types of damage, like boundary walls or landscaping.

 

Sum insured: Ensure your coverage amount reflects your property's current reconstruction cost, not just market value or purchase price.

 

Premium vs coverage balance: Don't opt for the cheapest policy without understanding coverage limitations.

 

Deductibles: Higher deductibles lower premiums but increase your out-of-pocket expenses during claims.

 

Claim settlement ratio: Research the insurer's track record for settling natural disaster claims promptly.

 

Documentation requirements: Understand what evidence you will need for claims (photographs, ownership documents, damage assessments).

 

Timeline for filing: Note the window period for reporting damage after a disaster.