Florida business owners can use parametric insurance to protect their outdoor events negatively impacted by rain.
What is parametric insurance?
Parametric insurance policies pay out when a certain metric, called an “index”, is met. For example, a farmer might buy a policy that pays out if the temperature hits 5° Fahrenheit or if the area receives more than 12″ of rain in a certain time period. Both of those indexes would protect the farmer if his crops were frozen or flooded.
How is the claim processed?
If the index is met, the policy limit is paid. Since the limits are paid every claim, insurance companies do not have many loss adjustment expenses (LAE) and parametric insurance claims are paid quickly. It’s important to note that the policyholder doesn’t have to actually incur any loss after the index is met. In the farmer example, if the crops were still viable after the index was met, the farmer would still receive the insurance policy limits.
What’s the catch?
These policies can be expensive compared to the perceived risk. This is underscored by the fact that these policies should be used in addition to traditional insurance policies.
How might this help my business?
If you are a Florida business owner who has an outdoor event planned, you might consider a policy that pays in the event of a certain amount of rainfall. If the rain were to discourage people from attending, driving down your revenues, then parametric insurance could help restore the lost profits. Likewise, businesses like food trucks might consider carrying parametric insurance since their customers will almost always be braving the elements.
As always, if you or someone you know needs assistance with an insurance claim, please do not hesitate to call or text Clint & Company, P.A. at (407) 212-7598 or at firstname.lastname@example.org.