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Thursday, 14 July 2011

Does my insurance cover Acts of God?

Acts of God is a term that refers to sudden and violent acts of nature that could not have been foreseen or prevented. Typically, cataclysmic events such as earthquakes, floods and volcanic eruptions fall under the category of "Acts of God." There is a persistent and pernicious misconception that insurance companies do not cover such events. In reality, insurance companies do not even use this legal term. In fact, you won't find the words "Acts of God" in any insurance policy in Canada; if you do, you should be highly suspicious of your provider!

In Canada, insurance companies use the terms "perils" and "exclusions" and are very specific about what is and what is not included in a policy. Perils refer to events which can cause a loss and could very well include earthquakes, floods and damage caused by volcanic eruptions; in short, most policies will include some so-called "Acts of God". Exclusions are events which you choose not to include in your policy and could also include "Acts of God". When you are drawing up a policy with your insurance broker, he or she will guide you through the perils which are included and the exclusions which you will not be covered for. It is imperative that you know what perils you are protected against in your policy. While a good broker will help you to understand your policy, it is incumbent about you to know your policy through and through.

At the end of the day, the term "Acts of God" is not a term that will appear on your policy. Keep in mind that some events that fall under this category traditionally may or may not be included in your policy. In certain areas, "Acts of God" such as flooding may cost a significant amount of money to insure because the risk is quite high, and therefore many people will not be covered. In other areas, where forest fires crop up regularly, the prohibitive costs of being covered against forest fires may prevent most from buying coverage. In the end, it is up to you to know your policy and be sure that you're covered for all perils that could conceivably arise.

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