The risk of natural calamities runs very high in countries such as ours. As per a latest research study, 60 per cent areas of India are prone to a natural calamity like earthquake. When clubbed with risks of other disasters such as floods and droughts, this number goes even higher.
The recent earthquake in Nepal shook India also. We have been suffering massive damages from such disasters in the past. Gujarat's Bhuj is known for its destructive earthquake, which gulped over 10,000 people. Jammu and Kashmir (J&K) recently suffered floods which caused huge damage to life and property.A number of Indian cities, especially in the Himalayan region and in the northern region states like Jammu and Kashmir, Uttar Pradesh, Uttarakhand, West Bengal, Assam and Delhi, come under seismic zone with high risks of earthquakes.
Orissa and Andhra Pradesh also faced cyclones which troubled millions of people. These calamities cannot be ruled out. The only way to deal with them is to prepare for them and cover risks in all possible manners.Taking general insurance is the most feasible way towards this.Recently, newspapers were flashing the news of the government's plans to set up a natural calamity insurance pool. This was a reaction to the massive destruction caused by Nepal earthquake and affected several parts in the northern region of India.
Typically, these kinds of funds, such as Prime Minister's Relief Fund, formed by the government are meant to provide widespread relief to victims of natural calamities. However, the amount disbursed by the government is generally hardly sufficient, from individual perspective.
Insurance covers you must have
Living in uncertainty is worrisome. No one can predict future but there are ways through which you can ensure financial security for yourself and your family. Here are the three covers you must have in your portfolio.
Life Insurance
This is the most fundamental priority for anyone who wishes to secure his family's financial life. Just imagine what happens to a family if the only earning member of a family loses his or her life due to a natural disaster. This can happen to anyone. So, why not to cover this risk of life through insurance?
You can buy an insurance policy which can replace your annual income. The amount covered should be at least 10 times of your gross annual income. The advantage is that you can accumulate your savings through insurance policy and get the returns when it completes the due period. It is a win-win situation for you in any case.
Home Insurance
It takes several years of planning and hard work to buy or construct a home. Unfortunately, most of us keep it exposed to risks. Very few people buy insurance for their homes. We buy insurance for vehicles, mainly perhaps because it is mandated by law. Why this ignorance towards home, which is always the most precious asset for us?
General Insurance
Also, protect your other assets including office, factory, workshop, vehicles, etc. These days, the amount of insurance premium has gone down by several times. It is easy and convenient to get insurance coverage.
The insurance industry in India is undergoing a massive wave of reforms. More and more companies are entering this industry and there is a competition to provide quality services at lesser price. Even public sector companies are waking up to the call and redefining their product lines and services.
Thus, all you need to have is to be conscious and aware, and get the right coverage for yourself.
General insurance plans covering natural calamities
Case in point: What affects insurability of risks in coastal areas?
Coastal areas are prone to high risk of floods and hurricanes. The cities, which are located on the shores of a sea or a river, naturally fall in the high risk category. However, given the social impact of insurance, companies cannot simply shrug their shoulders off from the responsibility of providing adequate risk coverage to people living in such areas.
The fast urbanisation in an emerging economy like India has further resulted in greater chances of natural disasters and it affects insurability of risks in various ways. The intensity of a flood can be much larger in areas which have poor drainage systems and high population density. Thus, insurance companies have to be extra cautious while issuing policies in coastal areas.
General insurance companies in such areas generally look for assets which can meet the challenge of floods and hurricanes. For instance, buildings which are located in well-maintained, open areas are less susceptible to damages caused by floods. Similarly, quality of construction is also one of the factors evaluated by a general insurance company – be it a state run enterprise or a privately managed company.
Areas, which are prone to earthquakes, are also looked upon with a set of parameters. It is preferred that buildings are earthquake resistant. All this is done to ascertain insurability of risks, and avoid over-exposure to catastrophic risks.
Although it is not possible to gauge the level of risks and possible magnitude of damage which any natural calamity can cause, insurance companies attempt to delimit their exposure.
For instance, with regard to the recent incident of massive floods in Jammu and Kashmir, the state High Court ordered insurance companies to assess the volume of losses so that appropriate relief could be provided to the victims. The Court was hearing a case lodged by the state Chamber of Commerce stating that insurance companies were not able to assess the real amount of losses and may end up gauging only a fraction of the actual damages.
Nevertheless, natural disasters also come with a great degree of after-effects, which generally take years to recover. Taking insurance cover, although, helps in minimising the qualms.
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