Selecting the Right Natural Disaster Insurance Policy: A Guide for Insurance Brokers and Agents

According to a recent report issued by First Street Foundation – a non-profit research organization that studies climate risks – over the next three decades, hurricanes will advance both further inland and up the northeast coast of the United States. If this should happen,  places likeTennessee, Arkansas, New York and the New England Region will be more susceptible to extreme-weather events. Indeed, as many as 13.4 million properties, which have until now have been outside of the hurricane-prone areas, may in the coming years be adversely affected.

Given this situation, it is likely that for the foreseeable future more insurance brokers or agents will have reason to advise their clients on natural disaster insurance policies that can provide them with added protection against catastrophic events.

Assessing Your Clients' Natural Disaster Risks

To best serve your clients, it’s important to understand their various risk profiles. Consider the following tips for identifying potential vulnerabilities to your clients’ businesses:

• Location:  Geographic factors play a pivotal role in determining the types of disasters your clients face, so monitor the likelihood of natural disasters occurring in your clients' areas, such as hurricanes, floods, earthquakes, or hail storms.
• Property type: Inspect your clients real estate to ascertain its condition and note how the construction of their various holdings may expose them to specific disasters. For instance, older buildings may be more susceptible to earthquake damage while wooden structures might be prone to destruction from wildfire.
• Historical data: Review historical data on natural disasters in your clients' regions to gain insight into potential risks. Analyzing past events can help you identify patterns and better understand the likelihood of similar occurrences in the future.

Some of the tools for evaluating risk include: risk assessment services, government disaster databases, and online hazard mapping tools.

Comparing Policy Options

When comparing natural disaster insurance policies, consider the following factors:

• Coverage limits: Ensure the policy provides sufficient coverage to rebuild or repair your clients' properties during a disaster. Adequate coverage limits can help prevent financial strain after a catastrophic event.
• Deductibles: Compare the deductibles on various policies to determine which option is most feasible for your clients. A higher deductible may lower the premium but could result in higher out-of-pocket costs when filing a claim.
• Exclusions: Understand any policy exclusions or limitations and consider whether additional coverage is necessary for your clients' risks. Be aware of any coverage gaps that could expose your clients to financial losses.

Working with experienced insurance providers can help you navigate policy options and make an informed decision suited to your clients' needs.

Customizing Your Clients' Coverage

Tailoring your clients' coverage through endorsements and additional policies can provide comprehensive protection against various natural disasters. Examples of specialized coverages include:

• Flood insurance: Protects your clients' properties from damages caused by flooding, which is typically excluded from standard homeowners policies. This coverage is essential in areas given to flooding.
• Earthquake insurance: Offers coverage for damages resulting from earthquakes, another common exclusion in standard policies.

If you would like to learn more about effective risk management strategies and risk-transfer products, please reach out to one of our risk management experts.

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