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Catastrophe Insurance

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Catastrophe insurance for a catastrophe is essential today. A catastrophe is defined as some type of man-made or natural disaster that is extremely severe. The wildfires in California and Hurricane Katrina are two relatively recent events that qualify as extreme catastrophes. At present, the insurance industry recognizes a catastrophic event as one that will result in $25 million or more in insurance claims.

What Catastrophes are Covered by Insurance?

Most homeowner's insurance covers many catastrophic events, including hail, wind, fire, explosions, riots, and terrorism. They also cover theft losses and relocation expenses when you have to live away from your home during rebuilding or repair. What they don't cover is several other natural disasters like earthquakes and floods. For those catastrophes, you have to have separate insurance policies, and often those policies come from alternate insurers, rather than your homeowner's insurance company.

Remember, when you choose your catastrophe insurance policy, it should come from a well-known and financially stable insurance company. Smaller companies can see their resources dissolve in the wake of a huge catastrophe, so keep that in mind when you choose your insurance agency.

Rebuilding After a Catastrophe

Rebuilding after a catastrophe takes time and lots of patience. Your insurance company should reimburse you for your living expenses during the time you have to be away from your home, and it should pay to rebuild your house to the current building codes. Make sure you have "replacement value" on your home, and make sure the insured amount is enough to completely rebuild your home. Many policy holders find out that their homeowner's insurance only covers depreciation value, and that won't be enough to restore their home to its former size and/or amenities. The insured amount shouldn't be your home's purchase price or appraised value, because that includes the land, and you only have to replace the house. Check with your insurance agent to make sure you have the proper coverage to completely rebuild your house after a catastrophe if you're not absolutely sure about your policy and its limits.

Catastrophe insurance is absolutely necessary if you live in an area that's prone to certain types of natural disasters, like earthquakes or floods. Since regular homeowner's insurance doesn't cover these disasters, make sure your protection is complete by having the right disaster insurance for your home and property.

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