Catastrophe Coverage 101

Guaranteeing the protection of a business or personal residence in the wake of a natural disaster is top priority. With that said, it’s oftentimes difficult to determine the line between necessary coverage and overkill or over payment.

It generally comes down to the statistics.

There are many factors that play into the type of coverage a business or residence needs. From the physical location and its subsequent environment – do you live in hurricane, tornado, or earthquake prone areas? – to the business service – do you provide services or product that could be targeted – to potential residential threats such as foliage and forestry, water ways such as lakes, rivers, and the ocean, or man-made threats such as a power plants, factories, and terrorism.

Overwhelming as it may seem, it’s oftentimes easiest to start by understanding the different types of coverage and applying the best to your specific situation.

The Cut & Dry of Catastrophe Coverage

Catastrophe coverage offers businesses and residences an additional level of protection in the event of catastrophic natural disasters such as floods, hurricanes, fires, and earthquakes.
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Investopedia delves into greater detail explaining that catastrophe coverage, “is different from other types of insurance in that it is difficult to estimate the total potential cost of an insured loss and a catastrophic event results in an extremely large number of claims being filed at the same time. This makes it difficult for catastrophe insurance issuers to effectively manage risk. Reinsurance and retrocession are used along with catastrophe insurance to manage catastrophe risk.”

Yet, catastrophe coverage extends further than natural disasters. Depending on necessity, a catastrophe policy will cover unusual or severe disasters such as man-made threats including terrorist attacks.

Therefore, how do you define a catastrophic event? Even further, how does an insurance company determine if an event is defined as catastrophic? The simplest answer, cost. Once the damages from an event cross a certain financial threshold, an insurance company can label said event as catastrophic. While this threshold is different for many insurance companies, recently, a general threshold was determined at $25 million.

 

The Best Assistance

Surmount Insurance Services recognizes the needs of clients with more complex personal insurance requirements and higher value sums insured, and offers our private clients service which provides a tailor made and flexible individualized approach.

Surmount Insurance Services (SIS) offers guidance and advice backed by the expertise of their executive team. For more information or to speak with a representative directly feel free to contact us.

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