Disasters that Insurance Policies do not Cover
Every year, many home and business owners discover there are certain disasters their policies do not cover. It is important to consider these issues before they happen and cause damage that will have to be paid for out of pocket. Earthquakes, floods, and acts of terrorism are three types of disasters that a policy will not cover.
Flood Damage Protection
Every home and business owner needs to know if his or her property is located in a flood zone. If it is, it is crucial to purchase a flood policy. Business owners should also find out how often floods have happened in that particular area in the past. In some cases, the government is slow to map out flood areas, so it is important to ask more than one source. To purchase a flood policy, discuss options with an agent. Flood insurance is provided by the National Flood Insurance Program. If a building is in a flood zone and its floor plans do not conform to plain building codes, the government requires it to be torn down after damages are more than 50 percent of its market value. People may purchase ordinance or law coverage, which is helpful for covering the costs of tearing down a building. Business owners should also make sure their properties are compliant with any coinsurance clauses in their policies.
Earthquake Protection
Homeowners and business owners do not have earthquake protection in their policies unless they purchase specific coverage for this type of loss. People who live in areas that are prone to earthquakes should purchase this coverage. Even if most earthquakes are small, history has shown that any areas prone to quakes will eventually have ones that are large enough to cause significant damage. There are different types of deductibles for earthquake policies. The deductible is calculated on a percentage of the coverage instead of a specific dollar amount. For example, a building owner who insures a property at five percent for $200,000 would have to pay for the first $10,000 of damages. It is important for business owners to remember that interruption protection only applies for losses that occur due to covered disasters or incidents. If a business does not have earthquake protection and has to shut down for a while, there will be no compensation for lost income.
Acts Of Terrorism Protection
In 2002, the Terrorism Risk Insurance Act was passed. It ruled that only businesses purchasing special coverage would be compensated for losses resulting from acts of terrorism. Many policies already include this, however, you need to check your policy to be sure. The only exception for this type of insurance is workers’ compensation, which only provides coverage for deaths and injuries resulting from acts of terrorism.
Nearly every business or home needs one or more of these types of coverage. Homeowners and business owners who are not protected could end up paying thousands out of pocket for damages. The premiums for these types of policies or endorsements are affordable, so it is important to discuss options and review coverage with your agent as soon as possible.
