Life Insurance and Natural Disasters

Does Your Life Insurance Policy Cover You and Your Family in Times of Natural Disasters?

On the 19th of June 2012 an earthquake struck Victoria reaching 5.3 on the Richter scale. This reached surrounding areas around Melbourne and up to the NSW border. The scary thing about natural disasters is they are unpredictable, they can happen anytime and at any place. Lack of preparation and awareness can have an unfortunate impact on many lives. Whether it is an earthquake, bushfire, tornado, flood, hurricane or tsunami preparing yourself can save you time and money.

There are risks that we can prepare ourselves for and there are risks that are unforeseen. Either way, preparing yourself can change the time it takes to get back on your feet and continue your life.

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
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Australia is No Stranger to Natural Disasters

Aussies are well acquainted with natural disasters. While Australia ought to be more seismically stable due to it's location, the seismic activity is higher here than any other places in the same region of plates. Geoscientists cannot explain why.

Professor Phil Cummins said, "We can't predict with an accuracy that would be valuable for evacuation or early warning, but we can forecast pretty well that certain parts of the plate boundary might be more likely to experience an earthquake in the next 10-20 years than others. But for regions that sit in the middle of a plate, like Australia, quakes can strike anywhere, making prediction practically impossible."

Western Australia has more earthquakes than all of the other states and territories in Australia combined.

Earthquakes Australia suffered in the past include:

  • Newcastle, New South Wales on December 28, 1989.This 5.6 magnitude shaker killed 13 people, and injured 160 people causing approximately $4 billion in damages. The damage reached 9,000 sq. km from the epicentre, and the extreme damage as well as the large area attributed to soft sediments in the ground, but they are not certain.
  • Beachport, South Australia on May 10, 1897.This earthquake measured 6.5 on the Richter scale and left 50 people injured and reached southern Australia and southwestern Victoria. The cities of Beachport and Robe experienced large amounts of damage, and Kingston and Mount Gambier were also affected.
  • Ellalong, New South Wales on August 6, 1994.A magnitude 5.4 earthquake resulted in nearly $38 million in insurance payouts due to the damage caused to hotels, homes and buildings. Roughly 1000 homes were damaged but luckily only 5 people were injured.
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Risks Associated With Natural Disasters

When people consider insurance for a natural disaster it is generally about home and contents insurance, but it is important to consider life insurance as well. Some insurance risks associated with natural disasters include:

  • Underinsurance. It is important to make sure that you have taken out an appropriate level of cover when i comes to home and contents insurance. Don't be lured in by cheaper premiums as it may end up costing you in the long run.
  • Life insurance.While you may have taken out a comprehensive home and contents policy, it is important that you have also got financial protection in place in case something were to happen to you. Having a life insurance policy that protects you in the event of a natural disaster can help to secure your families financial future.
  • Having no income. If you were injured during the disaster and are unable to work, there is the challenge of rebuilding the damages and taking care of your family. Try and find a policy that offers income protection either as a standalone policy or an optional extra.
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Ways You Can Plan Ahead of a Natural Disaster

It is imperative to be prepared for these situations in order to minimise the risks you and your family could face should disaster strike. Protecting your valuables can be a matter of making an emergency kit with important documents, first aid supplies, clothes, food and drinks. There are a few simple things you can do to make sure your family is protected in the event of a natural disaster:

  • Check your life insurance:
    Reviewing your life insurance policy to make sure that you are covered against natural disasters.
  • Speak to your financial adviser:
    Speaking to your financial adviser will provide valuable insight on how you are able to financially protect yourself and your family from a earthquakes, floods, bush fires or any other kind of natural disaster.
  • Check which disasters your home and contents insurance covers you for:
    Policies vary, so knowing exactly what you're covered for will help you avoid nasty surprises.
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Why it is Important to Review Your Life Insurance Policies for Cover Against Natural Disasters

If you have experienced a natural disaster such as a bushfire, flood, cyclone, or earthquake you won't need any convincing about the importance of having adequate insurance in place.

It is essential to review your insurance policies, including life insurance, to ensure that there are sufficient cover in place and a clear understanding of what you will and will not be covered for, which in this case is cover against natural disasters. Similar to your policy features and benefit, it is important to understand that policy exclusions also vary between providers.

There are many other reasons why having life insurance to cover you against natural disasters is important and keeping your policy up-to-date on a regular basis is a must. Keep in mind of the following few points:

  • Limited government assistance is available for individuals.Governments do provide assistance when an area has been declared a natural disaster but this mainly comes in the form of repairing infrastructure such as bridges, power lines, roads and railway lines.
  • It's not an excuse to say after the event that you 'didn't see it coming.'Natural disasters can strike when you least expect it. Due to Australia's climate, there is a high likelihood of bush fires effecting families during the hotter summer months. Having a disaster plan in place can not only give you peace of mind but it may end up saving your life.
  • Make sure that the your family unit is protected.
    Taking out joint a life insurance policy covers both you and your spouse/partner should either one of you pass away. Some insurance providers also offer free child cover as an additional extra with your existing life insurance policy.

There are far too many people who erroneously believe they have adequate cover, only to find out after a disaster hits that they are not protected at all. Natural disasters can have a significant impact on you and your loved ones, especially if there is not adequate cover in place. While life insurance cannot prevent natural disasters from occurring, you can rest assured that no matter what happens, your financial dependents will have the ability to move on and turn over a new leaf.

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Richard Laycock

Richard is the Insurance Editor at finder, and has been wrangling insurance Product Disclosure Statements for the last 4 years. When he’s not helping Aussies make sense of the fine print, he can be found testing the quality of Aperol Spritzes in his new found home of New York. Richard studied Journalism at Macquarie University and The Missouri School of Journalism, and has a Tier 1 certification in General Advice for Life Insurance. He has also been published in CSO Australia and Dynamic Business.

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