Are you prepared for a major catastrophe?

Hearing the siren of the fire engine as it rushes past your home on a Saturday morning prompts thoughts of where it’s going, whose house or business is burning, and the nature and scale of the danger or loss to those involved.

Uncomfortable moments like these can often, however, prove instructive as, “contemplating the consequences of one’s own home burning down often sets in motion a valuable appraisal of personal priorities and the protections in place - or otherwise – to preserve these” says Gari Dombo, Managing Director, Alexander Forbes Insurance.

Considering how much time, savings and effort are put into building and paying off a home, and how long this takes, it is surprising how poorly many people are covered for major disaster.

Yet the term disaster is relative.

To the average person a disaster would be damage that they could not afford to repair, compromising their lifestyle to an intolerable degree either “because the scope of their cover was too narrow - or because they were simply underinsured for the risks they were running” explains Dombo.

As far as scope is concerned, all buildings policies list the major causes of damage within their perils, such as fire, explosion, storm, flood and earthquake.

While, at first glance, this seems to cover most of the likely causes of major disaster, Dombo warns consumers to watch out for policies that:

· exclude tremors caused by mining operations. While it is unlikely that a whole house can be destroyed by mine tremors, having to fix multiple cracks over time could prove unaffordable - or wreck the value of your home.

· provide subsidence cover but exclude damage caused by “active soils”, that is, soil expansion and contraction due to changing moisture content. Consumers should be aware that a wider form of cover is available, without the soil moisture expansion and contraction exclusion, even if this means a higher premium.

· provide accidental damage cover with a limit. Instead, consumers may require accidental damage cover up to full sum insured. As such, Dombo advises consumers “to check whether they have accidental damage cover and whether this cover would still apply, for example, if a boulder rolled down the hill and destroyed their home?”

“It is far better to check the scope of your cover and change it if necessary, before a disaster happens – than to find out after years of premium payments that you are not, in fact, covered for certain types or variations of disaster” advises Dombo.

Scope of cover aside, the other major cause of serious problems when major disaster strikes is underinsurance. Many people are simply under-insured as they have not bought sufficient insurance to cover the full value of their potential loss.

Beyond replacing geysers or covering damage contingent upon leaking pipes or burglary, most people would be unable to replace their home and its entire contents, collected over a lifetime, if their home fell victim to fire or earthquake.

As such, “houses should, for example, be insured at their ‘build from scratch’ value, not their market value” says Dombo. If your house burns down, it won’t help that you insured it for its R750 000 purchase price if it now costs R1 million to rebuild. The same applies to household contents which, “if insured at their purchase price 20 years ago will simply not be able to be replaced today” adds Dombo.

The best advice is for policy holders to routinely check that the scope of their policies cover the full scale of loss that they could potentially suffer, while also regularly updating the value of those possessions that they cannot afford to replace.