From Fur Babies to Fire Hydrants: Your Home Insurance Premiums

When I got my kids a dog, I had no idea that it could affect my homeowners insurance. I happened to run into my insurance agent in the store when I was buying dog food and he asked me what kind of dog we had. When I told him, he said I should stop in the office the next day. I had no idea that things like this could affect premiums, so I started asking what else could do it as well. I created this site to help others understand some of the finer points of homeowners insurance and what they should think about to manage their rates.

An Overview Of Catastrophe Insurance

Insurance Blog

Homeowners' insurance is great, but the standard coverage doesn't apply to all risks. For example, standard home insurance won't help you out with several major catastrophes. However, you can buy catastrophe insurance for such risks.

What It Is

Catastrophe insurance protects you from losses associated with extreme disasters that can cause total damage or expensive losses in your home. The coverage is available for both natural and human-made disasters, such as wildfires, terrorist attacks, flooding, and earthquakes, among others.

The Challenge

Although most of the disasters that catastrophe insurance cover have a low probability, their high costs mean they are too expensive for ordinary home insurance policies to cover. What is more, it is difficult to predict the occurrence and cost of these disasters. Since insurance companies need to determine risks to calculate premiums; it means the premium determination for these catastrophes is not easy.

Moreover, many of these disasters affect multiple people at the same time. When a disaster such as an earthquake strikes an area, it can affect many homes, and each home will submit an expensive insurance claim. It is for these reasons that insurance companies have created policies specifically for these catastrophes. 

Who Needs It

Although anyone can benefit from catastrophe insurance, some people need it more than others. For example, you should consider the coverage if your circumstances fit any of the following three circumstances.

High-Risk Geography

Some areas are geographically predisposed to natural disasters more than others. For example, neighborhoods that lie along fault lines are more likely to experience earthquakes than other neighborhoods. Developments close to natural forests are more exposed to wildfires than other developments. If you live in such an area, consider buying the relevant catastrophe insurance.

High-Risk Designation

The government has also designated some areas as high risks for certain catastrophes. If you live in such a region, then you may be legally required to buy appropriate catastrophe coverage. This is the government's way of ensuring that you don't become destitute in case a disaster strikes. For example, homeowners in areas with high risks of a flood are usually legally required to buy flood insurance.

Inadequate Disaster Preparedness

Lastly, you should also consider catastrophe insurance if you think that the relevant agencies in your area that should deal with such disaster are not prepared enough. Say you live near a forest frequented by wildfires, but your local fire department is underfunded, and their equipment is inadequate. In such a case, buying fire insurance would be a smart move on your part.


12 October 2019