QUESTION: I recently bought a property in Manila and would like to know what insurance I need to protect my investment and my family from harm during a natural disaster, in the wake of the recent devastation in the Philippines?
Answer: The tragic aftermath of the recent floods in the Philippines has shown natural disasters can have a devastating effect on people, their homes and their livelihoods. Some people lost everything they owned and without any sort of insurance that loss can never be recovered.
Living in the UAE, it is easy to think that such natural disasters will never happen. But hurricanes and tropical storms are an annual occurrence in many parts of the world and so it is wise to protect yourself financially if you have family and investments in these hot spots.
The best step forward is to sit down with an independent financial adviser who can help you make an informed choice, list what your priority covers are and tailor a plan to best suit your requirements.
There are different insurance policies available for natural disasters, and you have to consider all the possible destruction that could be caused, such as physical harm, or the death of a family member, damage and destruction of property, and loss of income due to the damage of work-related tools.
Since you have a family, you obviously need to have emergency health insurance should any unfortunate accident occur. Additionally, if the only earning member of the family is harmed or loses their life then it is crucial to have a life insurance policy in place.
Key calculations
Try to determine the overall scope of the life insurance policy by calculating the two key needs of your family — immediate cash needs and income needs.
Cash needs are likely to include expenses such as funeral costs, any repatriation costs, hospital fees etc. 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 will be determined by how much income your family will need to sustain their lifestyle, and how long the income will be required.
Now that your immediate personal needs are covered, the next step is to evaluate both your building insurance and home contents insurance policy.
If you have a property, it is important that your home is insured for the actual replacement cost — first the cost of any demolition of remains, then the cost of rebuilding the house — rather than just the market value of the house. Under-insurance can be a real problem where people find they are not fully covered which negatively affects the insurance claim. You also need to make sure that the policy specifically covers natural disaster and not just fire or flood.
Insuring your home contents is also a wise move. Possessions such as electronic goods, furniture, books and CDs can all be expensive to replace, so make sure the cover you have is accurate and reflects the correct current market value of the items.
If you are self-employed or own a business, then it would be advisable to include Business Interruption under a Fire or Property All Risks Insurance. This cover will protect the business from any loss resulting from any stoppage of business operations due to fire, earthquake or any such other insured occurrence. This cover ensures that you are also covered for loss of income.
- Samantha du Plessis is a team leader, general insurance, at Nexus Insurance Brokers (www.nexusadvice.com).
