Earthquakes, tsunamis and nuclear disaster in Japan, deadly tornadoes, devastating floods and wildfires throughout Canada and the USA are not only taking a deadly toll in lives lost but also costing billions of dollars in property damage. And, now the possibility of renewed terrorism and security concerns following the recent death of Osama bin Laden.
Certainly the insurance industry remains capable and prepared logistically and financially to handle major losses. It is also important that home and business property owners be aware of the scope of their insurance programs and to be prepared for these and other worst-case scenarios.
Speaking on behalf of the insurance companies represented by Guthrie Insurance Brokers in Ontario, Canada, here is an overview of the degree of protection afforded under typical property insurance policies
Flood – Is not insured or usually insurable under a personal property insurance policy e.g. homeowners. Coverage may be available for qualifying commercial properties subject to appropriate deductibles. The Canadian and Provincial Governments may provide relief to homeowners and uninsurable businesses but the level of compensation is well below full replacement values and may also be limited to the types of property i.e. just the essentials.
Landslides/Mudslides – Neither insured nor insurable. As the risk is likely obvious, this is an area insurers avoid. Only those with imminent exposure would purchase the coverage resulting in insufficient funding from premiums to pay potential losses.
Earthquake – As with flood, earthquake losses are not insured. Coverage is often available as an option under a homeowners or commercial policy. In non-earthquake zones, it is rarely purchased although the premiums are modest. In earthquake zones it may not be available or cost-prohibitive. Due to the magnitude of loss potential, it is highly recommended on large commercial projects subject to appropriate deductibles.
Nuclear risks – There is no coverage under residential or commercial property insurance policies, nor is it available. In the event of a major disaster and property damage, Canada's Nuclear Liability Act allows for compensation up to a maximum of $75million. As this is equivalent to only 150 homeowners each with $500,000 of damage, this would not go far (Japan was $30billion+). Over this, it is expected the Government would step in but at what level?
Widespread Fires – Residential and commercial policies cover losses caused by fire of this nature. In some circumstances arranging insurance may be difficult or not be available due to obvious risk situations such as homes or businesses with a proximity to a dry, high-hazard forested area.
Hurricane, Tornado, High Winds – In this jurisdiction both residential and commercial policies cover wind-related losses and are usually subject to the standard deductible in the policy.
Terrorism – The attacks against the World Trade Center in September 2001 cost more than $40 billion in 2010 dollars. Without previous exclusions for losses of this nature and given the magnitude of this, and potential future losses, the insurance industry was prompted to examine their exposure in this area. Rather than pass along the significant premium increases necessary to fund potential losses, it was decided to discontinue coverage with a full exclusion. Depending on individual circumstances, coverage may still be available for commercial buildings on a highly tailored basis.
This is a very broad generalization of personal and commercial insurance as it relates to several types of disasters. As a dialogue of this nature can never address every individual circumstance, it is always important to understand the risks you face and to read and understand your policy. When in doubt, talk to your insurance advisor.
The Insurance Advisors @ Guthrie Insurance Brokers Ltd
Toronto- (416) 487-5200 – 1-888-310-SAVE (7283)
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