Importance of Natural Disaster Insurance for Business and Homeowners

June 5, 2023
A boy standing in the ruins of a collapsed building. Photo credit: Ahmed akacha.A boy standing in the ruins of a collapsed building. Photo credit: Ahmed akacha.

The Importance of Natural Disaster Insurance for Your Clients: A Guide for Insurance Brokers and Agents

Natural disaster insurance is specifically designed to protect businesses and homeowners from the financial impact of extreme weather events like floods, hurricanes, hail, and earthquakes.By contrast, many traditional insurance policies offer only limited coverage for these events, which is why it’s important for you to advise your clients on the importance of natural disaster insurance to protect their investments. As climate change moves apace, disrupting ever greater swathes of the global economy, the need for natural disaster coverage will only grow. Natural disaster insurance can help your clients to bounce back after a disaster quickly, and facilitate a smoother rebuilding process.

Types of Natural Disasters Covered

Common natural disasters covered by insurance policies include:

  • Hurricanes
  • Floods
  • Earthquakes
  • Wildfires
  • Tornadoes

Other weather-related events – e.g. hailstorms, landslides, and volcanic eruptions, may also be covered, depending on the policy. Additionally, "cat event insurance" covers catastrophic events that cause massive damage and financial losses. Understanding the finer points of policy coverage and exclusions is key to ensure you can advise your clients on adequate protection against potential natural disasters. Thoroughly reviewing policy documents and consulting with insurance professionals will help you identify any gaps in coverage.

Homeowners’ Insurance vs. Natural Disaster Insurance

While homeowners’ insurance covers damages to homes and personal belongings, it may not offer sufficient protection against natural disasters. For example, homeowners’ insurance typically does not cover flood or earthquake damage. (In fact, in Florida many homeowners have faced challenges in securing adequate coverage for their roofs, due to the high number of claims that have plagued the area.) Advising clients on supplementing their homeowners’ insurance with natural disaster insurance can provide extensive protection, positively contributing to financial security during a catastrophic event. Natural disaster insurance can also cover business interruptions and other indirect costs associated with catastrophic weather events. Such proactive measures should appeal to any risk managers across many industries.

Helping Clients Choose the Right Policy and Provider

To assist your clients in selecting the best natural disaster insurance policy, consider the following tips:

  • Assess your clients' properties for vulnerability to specific natural disasters based on location, construction, and local historical data.
  • Understand the coverage limits, deductibles, and exclusions of potential policies.
  • Compare policy premiums and coverage across multiple providers.
  • Collaborate with an experienced provider, such as Arbol, that is well versed in the nuances of the climate risk management sector.

By acting as an experienced insurance consultant, you can help your clients navigate the complexities of natural disaster insurance and tailor a policy that addresses their unique risk profiles. As climate change continues to exacerbate natural disasters, it's more important than ever to advise your clients about gaps in their current coverage and remedy them before the next cataclysmic weather event strikes. To reach one of our natural disaster coverage experts click here.


Continue reading