Bali, a paradise with stunning landscapes and vibrant culture, also faces unique environmental risks that every property owner should be aware of. Understanding these risks and securing the right insurance is crucial for protecting your investment and ensuring peace of mind. Here’s what you need to know:
Natural Disasters
- Earthquakes: Bali is located in a seismically active zone, near the boundary of the Indo-Australian and Indo-Chinese tectonic plates. This makes the island prone to earthquakes of varying magnitudes. While many are minor and go unnoticed, larger earthquakes can occur. To mitigate this risk, buildings should be constructed using reinforced concrete beams and columns, with properly locked steel reinforcement. A qualified structural engineer and well-supervised construction is essential.
- Volcanic Eruptions: Bali is home to active volcanoes like Mount Batur and Mount Agung. While Batur is less of a threat, Mt Agung has a history of significant eruptions, like the one in 1963 that caused widespread destruction. Even recent eruptions, though smaller, highlight the ongoing danger. Volcanic ash can also cause property damage far from the source.
- Tropical Cyclones: Although not as common as in other areas, Bali sits on the edge of the “Cyclone Belt” and may experience tropical cyclones, also known as hurricanes or typhoons. These storms are characterized by high winds, intense rainfall and can cause significant damage. Strong winds can exert pressure on a roof, and potentially cause an “explosion” of the house if the air pressure outside becomes lower than inside. Tiled roofs often fare better than corrugated iron during a cyclone.
- Tsunamis: Given the 2005 Aceh and the 2018 Sulawesi tsunamis, Bali is not immune to this risk, even if they are rare. Coastal areas are more vulnerable, and it’s essential to consider the potential impact when choosing where to build.
Other Risks
- Fires, Floods, Theft, Vandalism: These are common risks that any property can face. Taking out insurance to cover your house and contents is a good idea if you have spent a lot of money building and furnishing your home.
- Riots: Areas with political instability can also have a risk of riots. Riots, strikes and malicious damage are sometimes included in insurance policies.
Understanding Insurance Policies
- “Acts of God”: Many insurance policies exclude coverage for “acts of God” or “force majeure,” which may include natural disasters, wars, riots, or strikes.
- Property All Risk (PAR) Insurance: This standard policy typically covers events like floods, fire, theft, vehicle impact, and aircraft impact. It’s possible to get additional coverage for earthquakes, volcanic eruptions, and tsunamis. You may even get coverage for terrorist acts and malicious damage. Note that most policies do not cover war, insurgency and nuclear incidents.
- Contractors All Risk Insurance: If you are building a property, it’s recommended to get insurance during the construction phase. This covers anything that might go wrong during construction. Once the building is finished, it can be switched to a standard Property All Risk policy. Make sure that the builder cancels their insurance over your property at handover, as a property cannot be insured twice.
Key Takeaways
- Be Prepared: Understand the risks to your property in Bali, including natural disasters and other potential issues.
- Check Your Policy: Carefully review your insurance policy, paying attention to exclusions like “acts of God” or “force majeure.”
- Don’t Delay: Don’t wait until your property is finished to consider insurance.
- Read the Fine Print: Carefully read the small print of your insurance policy to make sure the risks you might face are adequately covered.
By understanding these risks and securing appropriate insurance, you can safeguard your Bali property and enjoy peace of mind.
