Learn how to expand your whole-life policy to provide coverage in case of natural disaster-related accidents, disabilities, and business interruptions.
Key takeaways:
- Life insurance policies can do more than pay out when someone passes away.
- Coverage can be expanded to encompass disaster-related accidents and disabilities.
- Life coverage can potentially protect businesses against disaster-related interruptions.
- Home insurance can be combined with life insurance to reduce the financial impact of disasters.
Hurricane Milton may not have hit New York, but its sheer scale and power are indicative of a growing environmental threat that’s affecting not only the wider United States but our entire planet.
The frequency of natural disasters is on the rise and, as their devastating effects increase, so do the number of insurance-related questions.
Arguably, the most important is, “What does life insurance cover?” Can a life insurance policy offer people or businesses any protection against hurricanes, flash floods, or other natural disasters?
Let’s answer these and other important questions so you can be informed and prepared.
Common Life Insurance Misconceptions
It’s a common misconception that only one type of life insurance exists to protect against one thing: death.
But the truth is that there are several types of life insurance, some of which offer potential help against disaster-related losses.
What does life insurance cover? Generally, it covers death by:
- Natural causes
- Illness
- Accidents
- Murder (excluding murder by the beneficiary)
- Suicide (in some cases)
When researching a policy, it’s important to understand the differences between whole-life and term life insurance policies.
Whole-life insurance covers the policyholder for the duration of their life, while term life insurance covers policyholders only for a certain period.
Group life coverage is another kind of life insurance provided to eligible employees by their employer. It’s typically less expensive than other types—sometimes even free—but these policies don’t always provide a great deal of coverage. Employees may have to supplement with additional plans.
Natural disasters can tragically prove fatal for some, making life insurance’s benefits obvious. However, these deaths don’t classify as natural despite the disaster being such.
It’s, therefore, the “accidents” category that allows natural disasters to further intersect with this coverage and expand its potential worth, even if the policyholder didn’t die.
How Life Insurance Can Lessen the Impact of Natural Disasters
Natural disasters can cause billions of dollars in damages and claims. Insurers are struggling to keep up while handling other pressures, including inflation and high reinsurance costs.
Policy providers are increasingly retreating from disaster-prone areas and even those currently unaffected but projected to be future danger zones.
This doesn’t necessarily mean, however, that life insurance leaves you high and dry against the worst weather. Whole life is a good example here.
Whole life insurance (a type of permanent life insurance) has a cash value element, meaning you have the option to borrow against your policy’s cash value. This could potentially be very useful to access funds that may be sorely needed to meet disaster-related expenses.
The typically limited scope of group life insurance could at least provide some coverage in the form of a death benefit for an employee’s beneficiaries should that employee be killed in a natural disaster. Best practice, of course, is to verify this with the employer and never assume you’re covered for a particular contingency.
Some insurers will help life insurance policyholders in other ways. Premium payments may be deferred if a disaster knocks out power and lines of communication directly associated with making payments.
Natural disasters also delay people returning to work and earning money. In such lenient situations, policyholders won’t have to pay for missing premium deadlines they couldn’t possibly meet.
Adding Riders to Your Life Insurance Policy
Riders can add a deeper layer of financial security to your life insurance policy. Although riders will increase premiums, the extra expense should be weighed against how helpful they could be in the event of a natural disaster.
Here are a couple of examples:
- Accidental death riders pay out a separate amount in combination with the existing death benefit. The accidental death payout may be as much as the original policy itself, a double sum that could ease the struggle following a disastrous loss.
- A waiver of premium riders takes effect if the policyholder is disabled due to an accident and can’t work, a possible outcome during a disaster. Life insurance premiums won’t be due for the duration of the disability, which can significantly reduce financial stress and free up funds for use in other areas.
Consider a business owner, for instance, who has been hurt or even killed in a natural disaster. A waiver of premium rider could contribute to keeping an enterprise operational until the owner recovers from a disability (since they won’t have to worry about paying premiums in the interim).
The increased payout of an accidental death rider could help a business survive the death of its owner, should the payout be received by a beneficiary involved in its operation.
Supplementing Your Life Insurance Policy With Additional Plans
Home insurance can provide significant financial assistance against natural disasters. It can provide even greater peace of mind when combined with life insurance and additional riders.
Many elemental damages associated with natural disasters are typically covered under standard home protection policies, such as wind, rain, fire, and hail. However, this is where the fine print really matters.
Natural disasters, like earthquakes and flooding, may require separate policies. This list may include hurricanes, depending on where you live.
That geographical risk factor makes understanding the specific terms of these policies so crucial, and if they’ll make your life any easier if disaster strikes.
Always consult an experienced insurance provider who can assess this and any other factors that might impact your disaster preparedness.
Stay Prepared With the Right Policy From NICRIS Insurance
The right life insurance policy and associated riders can play a key role in protecting individuals, families, and businesses from the worst effects of natural disasters. The NICRIS team keeps a close eye on how these natural disasters—especially flooding—will impact New York now and in the future.
We specialize in term life coverage and can help you find an insurance package that will give you greater peace of mind.
Take advantage of our free and personalized insurance review, send us a quick message, or get an instant quote today to get started.