The term "catastrophe" brings to mind an event so disastrous, so "out there," that the odds of it happening to us are very, very low. Hail, wildfires, tornadoes, winter and tropical storms and man-made disasters like explosions can all qualify as catastrophic events. Yet none of these normal occurrences (depending on where you live) are covered by a standard home or business owner's insurance policy. Keep reading to find out whether catastrophe insurance makes sense for your home or business:
How is a catastrophe different from a natural disaster?
In insurance terms, a catastrophe is "a natural or man-made disaster that is unusually severe," resulting in enough claims to reach a certain dollar amount predetermined by insurance companies. Although a natural disaster can (and usually does) qualify as a catastrophe, the term "catastrophe" can also include "man-made" disasters, such as terrorism, or a major workplace fire or explosion.
Do I need catastrophe insurance?
Your need for catastrophe insurance will depend largely on where you live. First, consult your homeowner's policy to find out what is and isn't covered. After that, your insurance agent can help you to understand what risks are unique for your area. If you live in the south, for example, the chances of being negatively impacted by a tropical storm are much higher than if you lived in another part of the country. Some areas are so high risk that you may actually be required to purchase catastrophe insurance.
Catastrophe insurance and waiting periods:
If everyone went out and bought catastrophe insurance as soon as they heard a hurricane was on its way, insurers would not be able to manage the risk. Because of this, there are often waiting periods on catastrophe insurance policies. So if you live in a high risk area, don't wait until the last minute to purchase your policy.
How catastrophe insurance works:
Catastrophe insurance doesn't cover every possible type of disaster but rather usually applies just to a specific risk. Flood or hurricane insurance, for example. Your insurance agent can help you determine which risks are most likely to affect your home or business and find the right policies to give you peace of mind.
What else you can do:
There are many other things you can do to prepare for disaster before it happens. Always keep a well-stocked emergency preparedness kit, containing food, water and other necessities for both your family and pets. Take steps to disaster-proof your home by installing storm windows and shutters, purchasing a strong security system, or using fire-minimizing landscaping. Last, be sure to keep good records of all personal property and assets, so that claims can be more easily processed should you experience a major loss.
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