Protecting Your Home and Business from Rising Flood Risks: A Comprehensive Guide
Learn how to safeguard your property and assets from flood damage with the right insurance policies and strategies.
Flood InsuranceHome InsuranceCommercial InsuranceParametric InsuranceClimate ChangeReal Estate NewsSep 07, 2024
The Standard Fire & Special Perils Policy and Householders Insurance Policy are two examples of policies that offer flood insurance. The former covers damage caused by various events like riots, strikes, floods, storms, and cyclones, while the latter provides coverage for household contents and buildings.
Individuals and institutions can opt for these policies, which also include add-ons like STFI (Storm, Tempest, Flood, and Inundation). STFI extends fire insurance policies to cover additional natural calamities like storms and floods.
Protecting commercial properties requires comprehensive insurance, which can be enhanced with flood coverage add-ons. Key insurance plans with flood coverage include the Standard Fire and Special Perils Policy, Shopkeeper’s Insurance Policy, Office Package Policy, and Industrial All-Risk Policy.
Homeowners have access to the Bharat Griha Raksha policy, a standard home insurance policy that offers coverage for up to 10 years and includes automatic protection for both the building and its contents. However, assessing damage after a flood can be challenging, making claim settlements difficult.
An alternative product, parametric flood insurance, has emerged to address this issue. Parametric insurance operates on predefined parameters, and when those are met, payouts are triggered immediately. Unlike traditional insurance, which requires assessing the damage after an event, parametric insurance is based on measurable metrics like rainfall levels or wind speed.
Parametric insurance fills the gap between increasing flood risks and the limits of conventional insurance. Instead of indemnifying the actual loss incurred, parametric products offer payouts when predefined thresholds, such as rainfall or heat index, are exceeded. This makes the claims process faster and more transparent.
The growing importance of flood insurance cannot be overstated. With climate change accelerating, the frequency and severity of floods have increased worldwide. Cities have expanded into high-hazard flood zones, exposing more people to flood risks. In India, floods have caused an average of $18 billion in economic losses annually over the past five years.
Businesses need to rethink their risk management strategies, and property insurance covering flood risks and other disasters is a critical component of comprehensive coverage. Recently, India's ministry of finance instructed public sector insurance companies to ensure swift claim settlements for those affected by the floods in Andhra Pradesh and Telangana.
Insurance companies have been instructed to ensure swift claim settlements by organising special camps and easing claim processes to provide relief to those affected. In addition, insurance companies have been asked to widely advertise the contact details of nodal officers, making it easier for policyholders to get assistance during this difficult time.
Frequently Asked Questions
What is flood insurance?
Flood insurance is a type of insurance that protects against damage caused by floods. It can be found within broader insurance policies like the Standard Fire & Special Perils Policy and Householders Insurance Policy.
What is STFI?
STFI (Storm, Tempest, Flood, and Inundation) is an add-on that extends fire insurance policies to cover additional natural calamities like storms and floods.
What is parametric insurance?
Parametric insurance is a type of insurance that operates on predefined parameters, and when those are met, payouts are triggered immediately. It is based on measurable metrics like rainfall levels or wind speed.
Why is flood insurance important?
Flood insurance is important because it protects against financial losses caused by floods, which can be devastating. With climate change accelerating, the frequency and severity of floods have increased worldwide.
How can I get flood insurance?
You can get flood insurance through various insurance policies like the Standard Fire & Special Perils Policy, Householders Insurance Policy, and Bharat Griha Raksha policy. You can also opt for parametric insurance, which is a new type of insurance that operates on predefined parameters.
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