Get yourselves covered now!

By Michael F. Rellosa

HAVING grown up in the provinces, one grows accustomed to the flow and ebb of the seasons and with it, the weather. It used to be that the rains precisely started in June, gathered strength through the months and petered out by late October. November to late April were the dry months when it begins cool and ends up blistering with relief ushered in by the arrival of the monsoon; pretty cyclical and rarely deviating. Not so anymore. Rains or rather super typhoons can now occur in any month of the year and barrel through any province with the bullseye anywhere along the eastern seaboard from the Babuyans all the way to the Celebes Sea. It used to be a narrower alley with the Bicol Region as the favorite entry point.

Climate change? Likely, but we and that means almost everyone from government bureaucrats down to the man on the street seems to be in a state of denial. In my mind, what we need is an all-of-nation approach to solving the problem. What the government can do, I will leave for a future article, but what the average person can do, I can hopefully offer some suggestions.

Obviously, for catastrophic risks which typhoons, floods, and the like fall under, the best option would be to obtain an insurance cover for it. If one suffers loss or damage due to strong winds, heavy rainfall, floods spawned by a typhoon then they can expect the insurer to pay for the damages allowing the insured to build back.

There are several kinds of policies that one can get to protect oneself. The most common being the AOG, or acts of God, or extending a fire coverage to cover it. With the addition of a measly 0.15 percent (the current rate for catastrophic perils, i.e., earthquake, typhoon and flood), one can be protected. So, if your house is worth say P3 million, the additional premium you would have to cough up to avail of this protection would be in the vicinity of P 4,500 only. Would you rather not get this extension to your normal fire policy than pay another P3 million to get your house back should it be totally blown away by a typhoon or swept away in a flood? Paying the P4,500 in extra premiums to rest easy knowing you will be indemnified or paid should the peril occur is, in anyone's reckoning, the better bet. With this type of coverage, however, it may take some time before you get the money to rebuild, the reason being that it goes through a process of indemnification, meaning you get paid what you actually lost, no more no less. That means, an expert is supposed to investigate the claim, come up with the cause of the loss and then quantify the actual quantum of the loss. This process may take several months.

There is, however, another way of protecting oneself and bypassing the indemnification process, which results in a faster payout, i.e., in a matter of days. This is where you get yourself a parametric cover. Parametric covers are simple, in the sense that it agrees to pay you a prescribed sum if and when the trigger or event that you want to be protected against happens. These triggers could be wind speed (typhoon strength) or amount of rainfall. If the pre-agreed authority, i.e., the national weather bureau (Pag-asa) declares the occurrence of these triggers, then the policy automatically pays out whether you actually sustained a loss. These parametric covers can be affordable as it is not designed to reimburse (or indemnify) you for your losses, it merely pays out a pre-agreed sum to help you tide over a loss. So, if your property is with P3 million but you opt to get only a P500,000 policy, it will pay you only the P500,000. Due to its design, it becomes affordable. This is a concept long cherished by Filipinos where one can purchase in smaller units, locally known as the "tingi system."

Both these types of products are already available in the market. Contact your trusted agent, broker, or the insurance company of your choice. They will be more than happy to assist.

Do not wait for another "Odette," it is best to look into it now.