How an ‘act of nature’ can affect your short-term insurance

An ‘act of nature’ can affect your short-term insurance and therefore you have to know what it is, why it matters and how to ensure that you are prepared for it.

In simple terms, an act of nature refers to natural events beyond human control that could not have been prevented by any amount of foresight or care. These events typically include natural disasters such as hail, storms, snow, hurricanes, earthquakes, floods, tsunamis and other severe weather conditions.

Hannes Smith, CEO of iWYZE, says the key characteristic of an act of nature is that it is unpredictable and unpreventable.

Insurance policies often use this term to specify the types of natural disasters that are covered or excluded. For example, a homeowner’s insurance policy might cover damage caused by a storm but exclude damage caused by flooding, which would then require separate flood insurance.

“Understanding what is considered an act of nature in your insurance policy is essential for several reasons. Knowing what natural disasters your policy covers will help you understand your risk exposure.”

ALSO READ: Insurance claims mount as floods devastate Eastern Cape

You might need additional insurance in some areas

For example, if you live in a flood-prone area but your homeowner’s insurance does not cover flooding, you might need to buy additional flood insurance.

Smith says when a natural disaster occurs, the distinction between what is and is not covered under an Act of Nature can significantly affect the claims process. If your insurance policy clearly outlines Acts of Nature, it can streamline the claims process and reduce the likelihood of disputes with your insurer.

“If you are aware of the coverage gaps it can help you to take proactive measures to protect your finances. For example, if earthquakes are excluded from your policy, you can decide whether to buy additional earthquake insurance to safeguard your property.”

South Africa recently experienced devastating floods that had a significant effect on homes and property. Standard building insurance policies could exclude flood damage and therefore it is important to understand what you are covered for in the event of a flood.

ALSO READ: Cape storm: 14 000 structures damaged, thousands left without power

Wildfires also an act of nature

Wildfires are another act of nature and are generally covered under standard building insurance policies. However, in areas with a high risk of wildfires, insurers might impose higher premiums or specific conditions and therefore you must ensure that you know if you are in fact covered for this kind of fire damage.

It is important to ensure you understand you building insurance cover and the different types of coverage in your building insurance policy, Smith says.

“For instance, damage caused by natural disasters is treated differently than general infrastructure damage. Homeowners have a responsibility to maintain their properties, including regular checks of gutters, roof maintenance and other preventive measures.”

He warns that neglecting these duties could result in rejected claims, especially if the damage could have been prevented with proper maintenance.

ALSO READ: Inside the life of the firefighters battling SA’s deadliest wildfires

Difference between market value and replacement value

You should also know what the difference is between market value and replacement value when considering building insurance cover.

Smith explains that the market value is what your property would sell for at current market conditions, while replacement value refers to the cost of rebuilding your home from scratch in the event of a total loss.

“Insuring your home for its replacement value ensures that you can fully rebuild without out-of-pocket expenses if disaster strikes.”

ALSO READ: Summer storms are coming – Here’s how to protect your property

How to be prepared for an act of nature

Smith has these tips for homeowners to help them stay prepared:

• Read the fine print: Carefully read your policy documents to understand the exclusions and limitations related to natural disasters.
• Consult your broker or insurer: Contact your insurer for clarification on your cover and its limitations.
• Assess your risks: Consider the natural disasters that are most likely to occur in your area and ensure you have the appropriate coverage. This might involve buying additional insurance for specific risks, such as floods or earthquakes.
• Stay informed: Keep up to date with any changes in your insurance policy or new insurance products that might better suit your needs.

“Understanding what an act of nature is in your insurance policy and how it affects your coverage will help you protect your property and your investments. Regularly revisiting your policy and consulting with your broker or insurer can provide the clarity and peace of mind needed to navigate the complexities of insurance coverage for acts of nature.”