The rains that have hit Rio Grande do Sul in recent weeks have destroyed farms, properties and vehicles. Even if they are insured, car or property owners should check their policies to see if they can get compensation.

Basic car and home insurance does not usually cover floods. Electricity, fire and lightning are the most basic types of home insurance. For vehicles, the most affordable policies cover theft and robbery. For coverages not covered by the policies, the insured will end up paying for the losses on their own, since brokers and insurers don't usually make their coverages flexible in the event of disasters.

The additional cover could be requested at the time of contracting for an additional price. If the insured has chosen not to take out optional cover, there is no possibility of insurers making payments for cover not taken out.

The floods caused further inestimable damage, with the declaration of public calamity in more than 90% of the municipalities in Rio Grande do Sul. Around 2 million inhabitants were affected. As if that weren't enough, policyholders are still at risk of not being entitled to compensation due to the nature of the disaster.

There is a trend in the insurance market to require additional cover for risks linked to the action of water, such as infiltration, flooding and inundation. Given the history of flooding in Brazil's major urban centers, insurers often classify these situations as exceptional risks. This type of cover is available through an additional contract.

The lack of clarity in insurance contracts is also seen as a problem. Exclusion clauses are the points to be analyzed in order to identify any unavailable cover in the contracts. Insured people may find it difficult to compare types of insurance, buying the cheapest, usually without cover for flooding, because it is difficult to understand the difference.

In the case of property, business and home insurance, you need to take out specific cover to protect yourself against the risk of flooding. Home insurance protects the insured's assets and can cover both the structure of the property and the goods that furnish the home. Housing insurance protects the financial institution that financed the property. In the event of the insured's disability or death, housing insurance guarantees that the financial institution will receive the remaining installments and, therefore, the entire amount financed. This insurance has become compulsory for real estate financing under the Housing Finance System.

The clause that defines the maximum amounts of cover must always be observed, as there is always a limit to the amount of compensation, i.e. if the insured's loss is greater, the insurer will only compensate up to the cash limit defined in the policy.

Consumers who have been affected should contact their insurance company and ask for a copy of the policy in order to register the claim. It is important that the insured informs the company that they live in the area affected by the rains and asks if there are any initial protocols to be followed.

If compensation is denied, the way forward is to file a collection action. The insurer is obliged to justify the reason for any denial, so that the insured can decide whether to pursue the claim in court.

The different interpretations of the concepts of inundation, floods and overflows make it difficult, at first, to objectively define the possibility of compensation.

Due to the nature of the disaster, it is possible that the population in the affected areas will have greater difficulties with insurers to protect their assets. Insurers must consider that insured assets will experience recurring problems, with the possibility of raising rates in order to continue taking on the risk. Recent events show that the region has become a risk area, and it is likely that rates will increase, especially for home insurance.

Finally, if there is no specific clause on floods or bad weather, it would only be possible to consider some kind of compensation if there is proof that the offer made by the insurer created the expectation that this kind of event would be covered.

By: Felipe Meneghello Machado

Civil Law | CPDMA Team