Globally, the occurrence of natural disasters is increasing. A natural disaster is defined as a major adverse event arising out of natural processes of the earth. Natural disasters are often called ‘act of God’. As the losses owing to these risks cannot be borne by individuals, it is shifted to insurance companies by paying a premium. Insurance firms cover up the losses to the insured.
What is covered?
In India, insurance against natural calamities is not a standalone policy but it comes as an in-built coverage with home and automobiles insurance policies. These policies have coverage against disasters such as fire, earthquake, lightning, cyclone, floods, landslide, tornado, hurricane, falling of trees and explosion. In western countries, flood insurance and earthquake insurance are not covered even in the comprehensive coverage and they should be purchased separately.
It is important to read the fine print of the policy documents to examine what are the items have been included and excluded. If you feel that some adverse events such as terrorism, damages owing to nuclear, radioactive and toxic explosives which need to be incorporated, talk to the insurance company and get it included. This may increase the premium amount, but it will provide you an exhaustive and complete coverage. Similarly, most home insurance policies do not automatically cover a business that is located in the home. In case, if you have a home business, make sure that you obtain property insurance for your home as well your business. One can also take additional coverage for business equipment or inventory that you keep in your home.
How to file your claims
It is the responsibility of the insured to take care of the item which is covered under insurance. Accident under the influence of alcohol or wrong side driving, driving without license you will not get any insurance claim. However, if the vehicle got damaged owing to natural disaster for instance rain or flood one can definitely claim insurance. As technology is advanced to a greater extent one can take a photo of the vehicle which is damaged and file a claim through mail to the insurance company stating the date and time indicating the policy number.
Some companies encourage policy holders to fill up the claim form online. While filing for online claims, one needs to enter appropriate details for easy evaluation of the claim. On receipt of mail or online complaint, the insurance company will arrange a surveyor who will visit your place to assess the damages to the vehicle or home.
In case of motor insurance, if the vehicle is damaged owing to flood or rain and if the insured makes an attempt to start the engine and thereby the engine seizes, then the insurance company will not admit the claim. The insurance company will admit events which are unexpected, whereas if you start the vehicle, it becomes a planned event. There is a myth that if you have parked the vehicle outside the premises, insurance claim is not admissible, which is not true.
How much one will get?
The claims process will be difficult if the policy documents are not available. For instance, in the recent Chennai deluge, items such as certificates, domestic appliances, jewellery, cash and insurance policies were reported as washed away. In such scenarios, the surveyor depends on other documentary evidence of existence or ownership like the copy of the sale deed in case of property or physical evidence at the scene to assess the loss. Cases where the house or vehicle has been completely washed away will come under complete loss and full sum insured will be admissible. Else, surveyor will put the case under partial loss and one will get refund for repair and reinstatement. Regular deductibles will apply as in case of items like jewellery and domestic appliances, which is normally up to 20% of the sum insured.
Know whom to contact
Majority of the insurance companies issue the policy on a single sheet wherein they might not have mentioned to whom one should approach in case risk happens. It is essential at the time of taking an insurance policy to obtain the details of surveyors and other relevant officials.
Some insurance companies may scare you by stating that you will lose out on the bonus if you make a claim. Do not heed to the same in case if you file for a claim against a natural disaster.
The writer is associate professor of finance & accounting in IIM, Shillong