AOG (Act of God) Perils Extension in CGLpolicies

 

 

 AOG (Act of God) Perils Extension in Commercial General Liability (CGL) policies refers to the inclusion of natural and unpredictable events under the coverage of the policy. AOG perils are events beyond human control, often caused by natural forces, and their inclusion can significantly broaden the scope of a standard CGL policy. These perils are not covered automatically in a CGL but have to be purchased separately as an add-on. Let us look at this aspect of CGL policies in more detail.

Indian firms looking to buy a CGL policy should ideally opt for an AOG perils extension because the country is geographically prone to various natural disasters such as earthquakes, cyclones, and floods. Including AOG perils in a CGL policy will help businesses in disaster -prone areas to protect against liabilities arising from damage or injury caused during such events.

AOG Perils covered in a CGL policy

1. Earthquake
2. Floods (including inundation, cloudburst, etc.)
3. Storms, Cyclones, Hurricanes, and Typhoons
4. Landslides and Rockslides
5. Tsunamis
6. Volcanic Eruptions

Types of businesses that should consider AOG coverage
Businesses in areas prone to natural disasters (e.g., seismic zones, floodplains, coastal regions) should consider AOG coverage. Industries like construction, agriculture, and real estate are especially vulnerable and might require this protection.

Key Features of AOG Coverage

• Risk Assessment: The insurer often assesses the risk of the business location before granting AOG coverage. For example, businesses in flood-prone or earthquake-prone zones might face higher premiums.
• Deductibles: AOG extensions often come with specific deductibles, meaning the insured must bear part of the loss before the insurance applies.

Exclusions and Limitations:

• Losses or damages due to neglect in mitigating risks (e.g., failing to maintain safety standards despite warnings).
• Certain indirect losses unless specifically included, such as business interruption.

Applicability in CGL

The AOG extension in a CGL policy typically covers third-party liabilities resulting from AOG perils, such as:

• Property damage: Claims from third parties whose property was damaged due to an Act of God for which the insured may be held liable.
• Bodily injury: Third-party injuries or fatalities caused by incidents triggered by AOG events at or around the insured’s premises.

Addition of AOG coverage to CGL policies
AOG coverage can usually be added to your CGL policies by purchasing specific endorsements or riders. Common options include:

• Earthquake Endorsements
• Flood Endorsements
• Windstorm or Hurricane Endorsements

Limitations or exclusions to AOG coverage
Exclusions in AOG extension in CGL policies:

·       Flood insurance may exclude damage caused by groundwater seepage.

• Earthquake coverage might exclude losses caused by subsequent fires or tsunamis unless separately covered.
• Coverage limits and high deductibles are common in AOG endorsements.

While AOG coverage often relates to property damage, liability aspects can also be involved. For example, if a natural disaster causes third-party bodily injury or property damage tied to your operations, liability may come into play, and additional AOG-related liability endorsements could be necessary.

Factors that determine cost of AOG perils extension in CGL policies

The cost depends on factors like:

• Business Operations of the insured
• Geographic risk (e.g., flood zones or earthquake-prone areas)
• Property value and business size
• Historical claims data for similar risks in your area

Premiums for AOG coverage are typically higher in high-risk regions.

Things to look out for before buying AOG extension for CGL policies

• Risk Assessment: Identify the likelihood of specific AOG perils in your area.
• Policy Exclusions: Review standard exclusions in your CGL policy and evaluate gaps.
• Coverage Limits: Ensure the policy covers potential losses adequately.
• Deductibles: Higher deductibles can reduce premiums but increase out-of-pocket costs in a claim.
• Regulatory Requirements: Check if your business requires specific AOG coverage due to local laws or contracts.

It is best to consult an insurance broker to seek clarification on such extensions and how it might affect coverage of the policy.

We at Zen Insurance Brokers assist in choosing an insurance policy with clauses suited to your requirements. Choose your insurance policy wisely. Get in touch with us for any assistance.

 

Disclaimer:

Zen Insurance Brokers is an IRDAI registered broker which facilitates quick and adequate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products.