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Last Updated : Jan 11, 2017 03:33 PM IST | Source:

Protect yourself financially from natural calamities

A common and recurring belief in almost all areas struck by a natural disaster is (a) none saw it coming, and (b) none were properly insured.

Naval Goel

You are lucky if you are not affected by the hurricanes that hit coastal areas of India. However, all bad things do not happen to others. Earthquakes, tsunamis, hailstorms, and even lightning can throw up nasty surprises. Such events not only send a country’s economy into a tizzy, but also take money matters of households for a joy ride. Many times, you have to pick up the pieces and rebuild your portfolio.

A recent report by Swiss Re has revealed that only 10% of over $52 billion lost in Asia in 2014-15 because of manmade and natural disasters were covered under insurance. The value of flood damaged property was around Rs 27,000 crore but only a fraction of that loss was insured.

The numbers are undeniably surprising because India is prone to natural disasters. More than 30% of the country’s landmass is prone to severe intensity earthquake.
Another 27% is prone to the moderate variety and only 43% falls under the low intensity or safe zone. But the risk doesn’t stop here. Almost 12% of the country is prone to floods, not to mention the 76% of its 7,516km coastline that bears the brunt of cyclones and tsunamis. But all these can be largely avoided if you plan your finances wisely and come out on top of these disasters.

Let’s find out how you can do this.

Full home insurance

A common and recurring belief in almost all areas struck by a natural disaster is (a) none saw it coming, and (b) none were properly insured. Sitting in our cosy and dry homes, we may not feel the true impact of the disaster. But the fact is, an overwhelming percentage of Indians are under-insured for natural calamities. Even if you have a homeowner’s insurance, it covers only a limited set of circumstances. In most cases they don’t include natural disasters that your locality may be prone to.

You may secure your home and business establishment with a basic fire insurance coverage that also protects your belongings against fire and other perils like storms, lightning, and flood. Earthquake is typically included as an add-on because such a cover depends on whether your house falls on a seismic zone or not.

Another option to get covered from natural disasters is to take a householder’s package policy (HPP). It adds more options to a basic fire insurance cover. Besides dealing with natural calamities, it secures your house and belongings against burglary, electrical or mechanical breakdowns, and general damage. HPP typically comprises optional insurance covers like public liability (where the insurance company pays off a third party for losses caused by you) personal accident (ensures income for a period when you may not be able to work because of permanent or temporary disability due to some accident), and workmen’s compensation (covers against death or injury of your domestic help).

Consider a group cover

Insuring a house is usually much cheaper and easier if you live in a group or cooperative housing society. Most leading insurers offer a 20-25% discount when the full housing complex is insured.

The housing society can cover the building(s) under a single policy because the structure is similar and identical for all units. But protection for the goods and belongings inside the flat, have to be done by individual owners, according to their respective valuations and specific requirements. Check with your residents’ organisation whether the housing society is already covered against such disasters.

Personal accident insurance

During natural disasters like flood or earthquake, there is a great possibility of serious injuries or disability. It may be recalled that at least 250 people were injured in the 25 April 2013 earthquake, and another 77 were injured in the one that hit 17 days later.

A personal accident insurance policy gives financial compensation if the incident leaves you temporarily or permanently disabled. There are four covers on personal accident policies: temporary total disability, permanent partial disability, permanent disability, and death. For permanent disability or death, the insurance company will pay you in lump sum, which is usually the full sum assured. For permanent partial disability, the company pays a part of the total sum assured, and for temporary disability, the insurance company compensates of up to 104 weeks. The weekly compensation, however, isn’t much.

The option to take a personal accident policy is usually included in the HPP. But you can buy a separate cover, after comparing features offered by your present insurance company and other competitors in the market.   

Life insurance

Natural disasters sometimes claim human lives. Even a basic term insurance plan can ensure your family faces no hardships in your absence. A term insurance provides the maximum cover against the lowest premium. However, you are not entitled to any returns if you survive the full term of the policy.

Saving your papers

No one knows when a natural calamity may strike. Except for your will, which is likely to be kept with your lawyer or the registrar’s office, you should keep all important documents like property ownership papers, passport, bank passbook etc. in a safe deposit box. Better still, is to keep them in your bank locker, where there is less risk of being stolen, damaged in fire, or destroyed in an earthquake. Make a few extra copies of these documents and leave them one set with your lawyer and the other with a trusted relative or friend. Having your papers in order will help prevent your legal heirs hassles while realise their claims.

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First Published on Oct 21, 2016 03:10 pm
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