Since last October 19, La Palma has suffered a new volcanic eruption, 50 years after the last eruption, that of the Teneguía Volcano. Fortunately, we do not have to regret human lives, but we do have considerable damage as a result of the kilometers of lava flows that have razed to this day almost a thousand homes, roads and public infrastructure. According to the President of the Government of the Canary Islands, Angel Victor Torres, the damage will exceed 400 million Euros.
Does home insurance cover damage from a volcanic eruption?
Insurers do not cover extraordinary natural phenomena, such as floods or floods, wind storms with gusts of over 120 km/hour, earthquakes, or what concerns us these days in La Palma, volcanic eruptions. In this type of catastrophe, it is the Insurance Compensation Consortium who responds to the owners of the affected homes, provided that they have a valid policy.
What is the Insurance Compensation Consortium?
It is a public body dependent on the Ministry of Economy and Finance. The Consortium is financed from the premiums paid by the clients of the insurance companies. The policy premium includes a surcharge in favor of the Consortium. For example, in home insurance, the consortium premium results from applying a rate of 0,07 per thousand on the insured capital.
Until September 30, the Consortium has received 289 requests for compensation by the consequences of the volcanic eruption of La Palma. Even The first compensation payments worth €624.242 have already been made. They may seem few, considering the volume of houses and other types of properties buried by lava. This is because, according to data from Unespa, in the Canary Islands only 48,03% of homes are insured, being the Community with the lowest level of insurance.
What problems can the insured encounter when claiming compensation?
As we indicated before, the affected home or property must have a valid policy. The Consortium will require the presentation of the current policy and the last paid receipt. However, the following drawbacks may occur:
- Correct assessment of the continent. If the home is underinsured because the value of the building that appears in the policy is less than the replacement value of the home, the Consortium will not pay 100% of the compensation, but rather the proportional part of the insured value. This can happen especially if the policy was contracted with the bank when formalizing the mortgage, insuring the amount of the loan granted and not the value of the home.
- Homes or housing extensions not legalized, which do not appear in the Cadastre, something common in the rural areas of the islands. In these cases, compensation will not be received for what does not legally exist.
- Finally, another problem outside the insurance sector, but which deserves special mention, is the legal situation of the land after the eruption. These lands will be out of order and it will not be possible to build on them again. In this sense, the President of the Government of the Canary Islands announced that the Government of the Canary Islands was already working on a Decree-law to requalify the land. However, this is a circumstance that will have to be studied in more detail, among other things due to the feasibility of being able to build again on the volcanic soil resulting from the eruption.
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