Insuring your property back home

Question: It has been terrifying reading about the recent floods in the Philippines and the devastating impact the natural disaster is having on peoples’ lives. I have recently acquired property in India, which is also prone to flooding, and am concerned I may not have the right insurance in place should such an event occur.

Answer: The UAE is populated with a huge number of residents originating from countries where flooding, hurricanes and tropical storms are an annual occurrence. Nevertheless, it is easy to forget about these dangers when living in the UAE where natural disasters are not that common and recent events in the Philippines serve as a stark reminder to all with investments overseas.

There are many different policies available for natural disasters, covering a variety of possible scenarios such as damage and destruction of a property and the physical injury or death of a family member.

Damage to property is one of the main issues when it comes to flooding. The first thing you need to do is to obtain both homeowner’s insurance and home contents insurance.

Underinsurance can be a real problem, so it is important to ensure this is avoided whilst declaring the sum insured to the insurer. In the case of underinsurance, the policyholder may receive only a proportionate share of the loss and not the full value claimed, as the insurer would then apply what is known in the industry as the “Condition Of Average” ( i.e. pay the loss in the same proportion as the sum insured bears to the actual total sum insured).

You also need to make sure that the insurance you take out is for actual replacement cost – the cost of rebuilding the house and replacing the permanent fixtures and contents – rather than just the market value of the house.

In addition, the policy must specifically cover flooding in the form of a natural disaster and not just from, say, faulty plumbing. For this type of insurance, policies often contain provisions for you and your family to move into comparable accommodation while repairs are being made. Carpet replacement, painting costs, and additional living expenses assistance may also be included.

Insuring your home contents is also a wise move. Everything from electronic goods to furniture can all be expensive to replace, so make sure the cover you have is correct and reflects the new replacement value of the items.

More important than your property, however, is emergency health insurance should your family be present during a flood.

You may want to ensure that medical evacuation is included on the policy so that, for treatment purpose, you are covered if someone needs to be airlifted out of the country.

Another consideration is Life Insurance. If the only earning member of your family is harmed or loses their life during a natural disaster then a policy of this nature can ensure that the rest of your family will be financially protected.

Determining the amount needed to be covered by a life insurance policy requires careful calculation of the appropriate sum assured, including cash needs incurred by expenses such as funeral costs, repatriation costs and hospital charges.

You might also want to make sure there is an emergency fund to cover rent, school fees and the costs of covering any debts or liabilities. The income needs of your family must also be included, taking into account how much and how long the income will be required.

Before you proceed, it is a good idea to talk to an independent financial advisor about your situation to ensure you

Rumi M. Sanjana, Director - General Insurance, Nexus Insurance Brokers