Property and House Insurance

Taking Out Building Insurance

If you take out insurance it is a good idea to read the small print before you sign to make sure the risks you might face are adequately covered. One particular area of concern regards "acts of god" which are often not covered.

Acts Of God

It is advisable to take out building or "house and contents" insurance partocularly if you have spent a lot of money building and furnishing your home. It is surprising how much the replacement value is when you have spent many years collecting

Of course there are those major events that occur from time to time that can seriously damage your property. It is a good idea to check the small print in your insurance policy to make sure you are covered. Particularly look out for the exceptions which insurance policies and other forms of contract these days might exclude such as “Force Majeure” (Greater Force). Force Majeure usually includes the traditional “acts of God” but also things like wars, riots, strikes or even crimes. Perhaps you may need to understand or even get a definition of what the documentation means to avoid unexpected loopholes.

It is also a good idea to consider the threats that your property might face and what steps you may be able to make to protect yourself against grumpy Gods who happen to get out of the wrong side of the bed.

Let us consider the normally accepted “Acts of God” risks:

Tropical Cyclones (Hurricanes and Typhoons in the Northern hemisphere).

These are intense low-pressure systems with average winds exceeding gale force (34 knots/62km/hr.) They have set records for sea-level low pressure (870 hPa), sustained winds of 250 km/h with gusts in excess of 300 km/h and 24-hour rainfall of more than 1800 mm. They form over warm sea water and, while they do not occur in the still air of the equator, they may form more than 5 degrees from the equator which means Bali at 8 degrees is on the Northern fringe of the “Cyclone Belt” latitudes where cyclones tend to occur. While not common they can occur in Bali and it is wise to be prepared.

Northern Australia is well aware of, and prepared for cyclones and building codes demand that houses incorporate protective measures. These include steel straps to hold wall and roof frames together, careful design of roof shapes to avoid suction which can pull roofs off, nailing of tiles onto the roof frames and cyclone bolts to hold down corrugated iron roof sheets.

The major problems in cyclones are caused by pressure variations. Strong winds flowing over a roof can behave rather like an aircraft wing. The increased airflow as the wind rises over the crest of the roof results in lower pressure and suction above the roof and this is what lifts roofs off. Tiled roofs fare better than materials like corrugated iron. In a strong cyclone the air pressure outside a house may be so much lower than inside the house that the house may “explode” blowing out windows and doors.

Earthquakes.

Bali is in one of the most unstable areas of the planet where tectonic plates cause volcanic activity, earthquakes and occasional Tsunamis. A boundary between two tectonic plates, the Indo Australian Plate to the South and the Indo Chinese Plate to the North, runs from Aceh nearly to Papua and passes just to the South of Bali. We are sitting right on the edge of a line of major earth movement.

Can we have earthquakes? I suspect the answer might be yes.

In fact earthquakes occur all the time here. Usually people don't even notice them but now and then there are larger ones. It is only a matter of time before there is a very large one.

All buildings should be built to withstand earthquakes. In many parts of Indonesia traditional building methods reflect this and use structures of wood or bamboo that can flex and sway without failure. Modern building methods, however, using heavy rigid masonry and it is imperative that properly designed and constructed reinforced concrete beams and columns are incorporated in the building structure. Reinforcing steel needs to be properly locked together where beams and columns meet and concrete and mortar should have sufficient cement to make them strong. Make sure a qualified structural engineer has designed your building and the construction is well supervised.

Volcanic Eruptions

In Bali Mount Batur is an active volcano but being within a large caldera it poses little threat. Mt Agung is a different matter. After being dormant for over a hundred years Mt Agung erupted during February 1963. Huge amounts of ash and debris were thrown out of the crater, lava flows travelled up to 7 klms to the North and Pyroclastic flows (very dangerous) flowed up to 15 klms to the South and East. Many villages were destroyed and 1,000 people were killed. The height of Mt Agung was reduced by 200 metres in what is considered one of the largest volcanic eruptions of the 20th century.

More recently Mout Agung erupted several times during 2018, though none of these was large the mountain is still considered dangerous and a large eruption could occur at any time.

Volcanic ash can cause damage to property even large distances away from the mountain itself.

Keep away from active volcanoes, they deserve a modicum of respect.

Tsunamis

As we all found in Aceh during 2005 and more recently in Sulawesi during 2018 large Tsunamis while they are very rare are frightening things. If one can happen in Aceh we can only suppose that one could occur in Bali. The odds are probably very low but if you are one of those people that has an ability to attract every disaster under the sun you might wish to make sure you live higher than a palm tree height above sea level and not too close to the beach. Have a look at a map and you might be surprised how much of Bali may be affected by a large tsunami.

It is a good idea to have property insurance and there are a number of reputable insurance companies on the island.

A standard Property All Risk (PAR) insurance policy normally covers things like flood, fire, theft, burglary, vehicle impact, aircraft impact, etc. You can also get additional cover that will cover earthquakes, volcanic eruption and tsunamis. These days you can also get cover for terrorist acts, riots, strikes or malicious damage. Things that cannot be covered include war, insurgency and nuclear incidents.

If you are building a property don't wait until your property is finished. It might be a good idea to take out insurance during the construction phase, this is called Contractors All Risk and provides you with insurance to cover anything that may go wrong during construction. Once the building is completed the policy is changed to a standard Property All Risk policy.

One thing to be wary of is that if you are building a property make sure that on hand over the builder or developer cancels any insurance policy they may have over your property. A property cannot be insured twice. If the developer does not cancel their insurance and your house burns down then they will get the payout.