Pennywise
Flood Insurance
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Insurance Pool
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Weather Insurance
by: Sahil | last updated: November 27, 2009
Category: Hurricane Insurance | Tags: Weather insurance, natural calamities, hurricane insurance
Category: Hurricane Insurance | Tags: Weather insurance, natural calamities, hurricane insurance
Weather insurance is usually offered to people who run businesses and is usually offered on a per day basis. This type of insurance should not be confused with flood insurance or any other kind of insurance for hazardous weather conditions. The major difference between a conventional home insurance and weather insurance is that the latter is offered only to business entities.
Weather insurance is sold by insurance underwriters on the same day for specific contingencies that may lead to losses. For instance, unexpected heavy rain during golfing season will reduce that day’s revenue for any golfing club. Therefore getting weather insurance will cover the losses on that day.
This type of insurance is usually used by business entities that are dependent on the weather for smooth operations of business. Most of these companies may suffer huge losses because of bad weather on a single day. Golf courses, ski resorts, and private events are some of the examples of users of such type of insurance.
This type of insurance is also called same-day event insurance and is also used during weddings or other important parties. If extreme weather reduces or prevents people from attending the event then the amount spent on the event can be recuperated. Usually these insurances also have a premium and a deductible; the amount of premium being inversely proportional to the deductible.
Another form of weather insurance is seasonal insurance where the insurance is applicable to the particular season. The period of the season is generally defined by the insurance company and is obviously longer than a day or two. Actually it does not matter if the event itself is held indoors or outdoors. The only factor is whether the weather is harsh enough to keep people from attending the event.
Weather insurance is calculated by historical percentage chance of the particular event taking place. The premium completely depends on the day or the season; the chance of raining in November is greater compared to any other month so the premiums for insuring an event in November would be higher.
Weather insurance is not only used by big businesses or is not just limited to people who are organizing big events. This type of insurance is also providing hope to poor farmers in some parts of the world by providing insurance in case of draught. The unique feature that this insurance has is that some companies are providing it in exchange of labor instead of cash. This is true in countries such as Ethiopia where people cannot afford to pay the premiums using cash or monetary instruments.
The events that can cause damage can be categorized according to their risk factor and probability. High risk-low probability events are hurricanes, snowfall exceeding criteria limits on certain days, rained-out events, etc. Lower-risk, high-probability events include cool summers and warm winters. It becomes apparent that weather insurance protects the losses occurred due to unusual or erratic weather conditions. This makes them different from other normal insurance policies that are related to weather such as predictable and unpredictable floods and earthquakes.
There are a only some reasons when you can benefit from this type of insurance – when your business will suffer huge losses due to erratic weather, when you organize an event that is expensive and important, and for farmers who rely completely on the performance or non performance of weather related incidents. In other cases it is better to choose a traditional form of insurance since weather insurance can turn out to be costly.
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