Insuring against natural disasters

Question: I am a New Zealander currently living in Dubai who owns a property in Christchurch which was hit by a devastating earthquake last week. Fortunately my family, friends and property are all fine. However, the event made me realise the importance of insurance and I am planning to review my current policies to ensure that I am adequately covered if I am less lucky next time. What are the specifics I should be looking out for?

Answer: Many expatriates living in the UAE come from countries where flooding and earthquakes do happen and it is easy to forget the damage these natural disasters can reap when you are living so far away. The recent tragic events in New Zealand will serve as a stark reminder to all with properties overseas that financial protection for these is wise.

In terms of insurance there are many different policies available for natural disasters, covering a variety of scenarios such as damage and destruction of a property and the physical harm or death of a family member. Speaking to an independent financial advisor will ensure that you receive the best advice on all these areas, putting your mind at ease over any future natural disasters.

Damage to property is one of the main concerns when it comes to earthquakes and the most important thing you need to do is to review both your homeowner's insurance and home contents insurance as under-insurance can be a real problem. Make sure that the insurance you have is for actual new replacement cost i.e. the cost of rebuilding the house and replacing the permanent fixtures and contents as new, rather than just the market value of the house.

You also need to make sure that the policy specifically covers a natural disaster and not just damage from commonplace accidents and incidents. In the case of Earthquake cover, it would be wise to ensure that the policy covers earthquake (fire and shock). Also look at whether your policy contains provisions for whoever is living in the property at the time to move into alternative comparable accommodation while repairs are being made. If you have tenants this may be important so you don't lose them and their rent. Carpet replacement, painting costs, additional living expenses assistance, may also be included in any policy — however as expected the cost of the policy will rise the greater the additions there are to be made.

Home contents insurance is another area where under-insurance is an issue, which again needs you to look at new replacement costs that reflect the correct value of the items. Individually, possessions such as electronic goods, furniture, books and CDs appear inexpensive but collectively these costs can add up to a significant sum.

Now that you have your property protected you may want to think about your family and what would happen if any harm came to them during another earthquake.

Top of your list, if you haven't already got it, is emergency health insurance. You may want to ensure that medical evacuation is included on the policy so that your family members are covered if someone needs to be airlifted out of the country for treatment.

Life insurance policies taken for members of your family where you are the bread winner, can also make a very difficult time that little bit easier. Such policies ensure that if something dire happens to the earners and their income is lost then the rest of the family members are financially protected. Working out the amount needed to be covered by a life insurance policy requires methodical calculation of cash needs incurred by expenses such as funeral costs, hospital fees etc. where the assistance of an independent financial advisor would be most useful.

-  The writer is Director of General Insurance, Nexus LLC. If you have any question, please email to: advice@gulfnews.com