Government and disaster insurance

Indonesia is preparing a disaster insurance scheme to cover financial losses and provide for emergency needs as the country constantly faces strings of natural disasters causing heavy social burdens.
Finance Minister Agus Martowardojo said Thursday the insurance was important as natural disasters have caused increasing financial losses and emergency needs to handle the aftermath of such disasters.

The most recent natural disasters of an earthquake-triggered tsunami in Mentawai, West Sumatra, and the eruption Mount Merapi in Yogyakarta, have rallied people to show stronger support for the establishment of disaster insurance.

“I have asked the Indonesia Capital Market and Financial Institution Supervisory Agency chairman to conduct a study on the establishment of disaster insurance,” Agus told reporters at the Finance Ministry.

He added disaster insurance was a very common initiative for developed countries but not developing countries, including Indonesia. Agus said the government would soon reveal the study results in a meeting with stakeholders at the ministry.  “In principle, we have reached an agreement on the need to establish disaster insurance,” he said. “The insurance may be similar to other forms of life insurance,” he added without elaborating.  He only said the premium would be taken from the state budget although he was not sure whether it would be included in the 2011 State Budget.  Agus said the initiative needed careful arrangement including the insurance form, risk calculation and disbursement process.

Disaster and Insurance

While many of us don't like the idea of paying our insurance premiums each year, we're always glad we did when we need to file a claim.  But how many of us even think about buying insurance against disasters?  We might even be lulled into complacency because we're thinking that our existing homeowners policy insures us against natural disasters.  But as we'll soon explain, that's not necessarily the case.

In this article we're going to explain what coverage you can expect from a "standard" homeowners insurance policy.  We're also going to talk about events that might not be covered under an existing policy that can lead to devastating losses.  With those two pieces of information, you can then make an educated decision as to whether or not you need to purchase disaster insurance.

Why Insurance

Insurance exists because risk exists. There is a possibility that anyone could become a victim of fire, theft, auto accidents, other injury accidents, illness, severe weather, lawsuits and more. We are subject to risk at home, at work, in our cars, traveling, in the hospital or anywhere at any time.

Insurance cannot remove the risk or the likelihood that one might become a victim of any of these events, but what it does is transfer all or some of the financial impact of any of these events. Insurance exists to help individuals recover from the financial consequences of these events by pooling the resources of a large group to pay for the losses of a small group.