A recent study by global insurance giant Munich Re indicates that although the number of natural disasters has increased five-fold in the last 30 years, many people still do not buy insurance to protect themselves or their property from catastrophic events. Although no one knows for certain the cause of the increase in natural disasters, the frequency and strength of cataclysmic disasters seemingly continue to increase from one year to the next.
It may be the result of climate change or the fact that society is building in more hazard-prone geographical areas that the number of catastrophes is increasing. For example, there is no doubt that over the last few years, we have seen a number of unique weather events. This year alone, the West Coast experienced one of the driest winters on record while the East Coast had one of its coldest and wettest. This results in weather-related losses of historical proportions. And with warming spring weather, flood events are probably likely this year as well.
In 2013, the losses from natural disasters exceeded $21.8 billion, with only $12.7 billion of that amount insured. Unfortunately, that means that over 40% of the losses were not insured. Losses from floods are the most common losses incurred by property owners, with 87 percent of losses coming from people who don’t have a flood policy. Many people choose to go uninsured for flood because frankly, it’s expensive. But losses from not insuring yourself against a flood will cost more. Many businesses struggle to recover from uninsured losses and in fact, 25 percent of businesses that suffer an uninsured loss never re-open their doors afterwards. And though businesses may hope to recover from an uninsured natural disaster through a low interest loan or payment from the government, not every catastrophe is approved for federal assistance -- and this leaves many people without any resource for inexpensive recovery funds.
The best thing a business or individual can do is take a proactive approach in planning for disasters. If your property is potentially exposed to a particular risk such as flood or earthquake, consider what the cost of properly insuring it might be. Compare that to the cost of an uninsured loss. You also need to consider the probability that a natural disaster might occur. Weighing all of these factors, you can decide what to insure, and how much to insure.
In all cases, work with your insurance agent to get the most appropriate coverage for your property. Western Growers Insurance Services (WGIS) is a full-service agency and can assist you with all of your insurance needs including flood and earthquake insurance. Please contact Greg Nelson, AVP of Commercial Lines for more information.
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