Why it’s essential to know what ‘acts of nature’ you’re insured for

Being aware of coverage gaps can help you take proactive measures to protect your home — and your finances, says Old Mutual

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When it comes to your homeowners insurance policy, the term ‘act of nature’ might seem like a mystical phrase, but it does have a very specific and practical meaning. Understanding what constitutes an act of nature and how it affects your insurance coverage is crucial for any policy holder. 

In simple terms, an act of nature refers to natural events that are beyond human control and could not have been prevented by any amount of foresight or care. These events typically include natural disasters such as hail, storm, snow, hurricanes, earthquakes, floods, tsunamis and other severe weather conditions. The key characteristic of an act of nature is that it is unpredictable and unpreventable.

Insurance policies often use this term to specify the types of natural disasters that are covered or excluded. For example, a homeowners insurance policy (also known as home or building insurance) might cover damage caused by a storm, but exclude damage caused by flooding, which would then require separate flood insurance.

Why it’s important to know what’s considered an act of nature

“Understanding what is considered an act of nature in your insurance policy is essential for several reasons,” says Hannes Smith, CEO of iWYZE (underwritten by Old Mutual Insure). 

“Knowing what natural disasters your policy covers helps you understand your risk exposure. For example, if you live in a flood-prone area but your homeowners insurance does not cover flooding, you might need to purchase additional flood insurance.

“When a natural disaster occurs, the distinction between what is and isn’t covered under an act of nature can significantly impact the claims process. If your insurance policy clearly outlines acts of nature, it can streamline the claims process and reduce the likelihood of disputes with your insurer.

“Being aware of the coverage gaps can help you take proactive measures to protect your finances. For example, if earthquakes are excluded from your policy, you can decide whether to buy additional earthquake insurance to safeguard your property.”

Recently, SA has experienced some devastating floods that have had a significant effect on homes and property. Flood damage may be excluded from standard building insurance policies, and therefore it’s important to understand what you are covered for in the event of this disaster.

Another act of nature is wildfires, and these are generally covered under standard building insurance policies. However, in areas with a high risk of wildfires, insurers might impose higher premiums or specific conditions, so be sure to know these details in your cover.

Understanding your building insurance cover

It’s essential to understand the different types of coverage in your building insurance policy. For instance, damage caused by natural disasters is treated differently to general infrastructure damage.

Homeowners have a responsibility to maintain their property, including regular checks of gutters, roof maintenance, and other preventive measures. Neglecting these duties could result in claims being rejected, especially if the damage could have been prevented with proper maintenance.

Market value vs replacement value

When considering building insurance cover, it’s crucial to understand the difference between market value and replacement value.

The market value is what your property would sell for under current market conditions, whereas replacement value refers to the cost of rebuilding your home from scratch in the event of a total loss.

Insuring your home for its replacement value ensures that you can fully rebuild without out-of-pocket expenses if disaster strikes.

How to ensure you’re adequately covered for an Act of Nature

Smith provides a few tips to help you stay prepared:

1. Read the fine print: Carefully read your policy documents to understand the exclusions and limitations related to natural disasters.
2. Consult your broker or insurer: Don’t hesitate to contact your insurer for clarification on your cover and its limitations.
3. Assess your risks: Consider the natural disasters that are most likely to occur in your area and ensure you have the appropriate coverage. This might involve purchasing additional insurance for specific risks like floods or earthquakes.
4. Stay informed: Keep up to date with any changes in your insurance policy or new insurance products that might better suit your needs.

Understanding what an act of nature is in your insurance policy and how it impacts your coverage will help you protect your property and your investments. Regularly revisiting your policy and consulting with your broker or insurer can provide the clarity and peace of mind needed to navigate the complexities of insurance coverage for acts of nature.

For more tips on how to successfully claim from your insurer, visit the Old Mutual website.

This article was sponsored by Old Mutual.

^{The information herein does not constitute financial advice. Old Mutual Insure Ltd is a licensed financial services provider and non-life insurer.}