Managing insurance policies in disaster-prone area

The cyclone 'Nilam', which recently ravaged Andhra Pradesh and Tamil Nadu's Mamallapuram coast, caused severe damage - 28 lives were lost, 150,000 individuals displaced and crops in 1.2 million acres destroyed. While the total damage is yet to be quantified, rough estimates peg it at more than Rs 100 crore (Rs 1 billion).

Krishnamoorthy Rao, managing director and CEO at Future Generali Health insurance, says, "We have received claims of Rs 75 lakh (Rs 7.5 million), including motor and non-motor claims." While a normal motor policy covers for natural calamities, a personal accident policy can cover injured individuals during such disasters.

However, you will have to shell out higher premiums if staying in coastal or disaster-prone areas. The premium rates on properties depend on its location, extent of cover and the nature of occupancy (whether industrial/non-industrial/residential).

One can expect a discounted premium if the claims experience on building safety measures is good. "If the property is exposed or more prone to natural calamities, then a 10 to 20 per cent extra premium is levied on the base premium," said an industry source.

Customers can also opt for business interruption cover in property policies, which provide for loss of profits due to reduction in turnover or output caused by natural calamities.

To safeguard his property against risks such as earthquake, lightning, storm, tempest and flood, one has to buy a rider. The flip-side of this policy is that it doesn't cover the first Rs 10,000 of each and every claim made.

Disaster-prone areas include the coastal regions of Tamil Nadu, Andhra Pradesh, Odisha and Kandla/Mundra ports in west Gujarat, prone to natural disasters such as cyclones.

Hilly

areas such as Uttarakhand and Himachal Pradesh, too, are considered risky, as they are prone to earthquakes, landslides and rockslides.

There are a number of ways in which you can claim insurance. If the properties are damaged due to such natural calamities, then the loss incurred gets covered under a fire policy, where the asset covered is the property. Insurers sell this policy under the heading fire/ property insurance.

If death occurs (even due to a natural calamity), one can make a claim under his life insurance policy, where the insurer promises to pay a sum of money to the beneficiary upon the death of the insured.

Partial or temporary disabilities can get covered under a personal accident policy. It is available in the form of a rider on life, non-life, as well as motor policies.

Hospitalisation policies also cover natural calamities in the sense that if a person suffers any injury due to natural calamity and requires hospitalisation, insurers will pay the expenses incurred during the stay in the hospital.

K Pethannan, senior branch manager, New India Assurance, says, "If your business is into risky sectors like fire or chemicals, then you may have to cough up a premium of around Rs 225 for Rs 100,000 sum assured vis-a-vis Rs 50 for textile-related business (which is considered less risky) for the same cover."

An individual who has suffered losses in cyclone Nilam could cover most losses if he had the right policy, with the right coverage.

"We have seen that people think of insurance against natural calamities only when a disaster strikes. Disasters like the recent cyclone in Tamil Nadu are grim reminders of nature's fury, and insurance is the only solution through which such losses can be recouped," said V P Sharma, head of property insurance, Bajaj Allianz General Insurance.