One of the very many lessons Hurricane Beryl has taught property owners is the value of peril insurance. It’s not mandatory for a single home, but it makes sense to protect your investment just in case a storm or some other catastrophe hits.

Allied Insurance Brokers Managing Director
Amanda Beepat spoke on the topic at the recently concluded Diaspora conference in front of a roomful of potential clients, all of whom indicated they would likely work with a financial institution when purchasing property.

“The lending institution will usually require that you have peril insurance,” she said.

Beepat explained that peril or catastrophe insurance covers what used to be called Acts of God until the term became politically incorrect. In addition to hurricanes, it covers things like earthquake and fire.

Beepat noted that it would come in handy for major damage.

“If you have a two-storey or a one-storey building and it has a crack on a beam, can you fix it? Not many of us have that liquid cash. What the lending institution does for you is have this insurance on the property… and they will fix it. So it suits you to have your property insured,” she stressed.

The insurance executive conceded that protection does not come cheap as “property rates have doubled in the last year”.

At the end of 2022 the Insurance Association of Jamaica (IAJ) raised an alarm that the property insurance market was in a crisis and told homeowners to brace for tough times ahead. The challenge stemmed from large reinsurers pulling out of the Caribbean or deciding not to offer more capacity to companies in the region. As a result, IAJ President Sharon Donaldson admitted then that some people “may not be able to afford insurance they require and in some cases they will not be able to get it because there’s absolutely no capacity”.

Reinsurers negotiate deals to transfer portions of their risk portfolios to other parties, a way to reduce the chances of them having to pay out large sums on clients’ claims. There is a limited amount of these players in the market, so that impacts capacity. The Caribbean’s annual hurricane season does not help and each year the number of storms predicted is keenly watched. Beryl appearing unexpectedly early in the season has made property owners and insurers sit up and take notice.

Category 4 Beryl left a trail of devastation in the Eastern Caribbean early last week before hitting Jamaica’s southern coast on July 3 killing at least three people and inflicting heavy damage to homes, infrastructure, and agriculture.

As Allied’s Beepat noted, despite skyrocketing premiums, it just makes sense to protect such a significant asset. This becomes even more important when the property is an investment.

“If [for example] you’re the landlord and you have a tenant, you have a liability as a landlord. Maybe through no fault of yours something happens to a third party who comes to your premises; you can be at risk,” she said.

“The only mandatory insurance is third-party motor insurance. You’re not mandated to insure your… single home, you don’t have to. But it suits you to do so,” she added.

However, Beepat made the point that property buyers who take out a mortgage are required to have insurance.

“The lending institution requires that you have a sort of a life insurance and it is called creditor life,” she said.

With that coverage in place, the mortgage is paid off in the event that the mortgagor dies, and the deceased’s heirs own the property loan-free.

“It serves you as well,” said Beepat. “Your family, the same family you’re trying to protect, still owns the property because you took out creditor life.”

The insurance executive spoke of the importance of factoring in the cost of insurance when making a purchase as it can make up a significant chunk of the funds needed.

“These are the built-in costs that can sometimes take away that [dream] that you’ve planned so carefully,” she said of peril and creditor life insurance.

“Imagine you’ve seen something that you have saved for and you can actually acquire, but when you add in these built-in costs you no longer can. I encourage you to make sure that when you are purchasing you ask those questions about the insurance requirements for the property,” she said.