What is an “Act of God” in Insurance?

The phrase “Act of God” may sound religious, but in insurance, it just refers to uncontrollable natural events. The term often appears in insurance discussions, typically used by insurance brokers who have a full grasp on modern “insurance lingo,” and it can even appear on your policy. However, the term represents a concept that often perplexes policyholders. What does it mean? Is it included in my home insurance policy? Understanding what an “Act of God” may refer to is crucial for a policyholder’s deeper understanding of their insurance coverage, as its implications can make or break your coverage.

Whether you’re simply curious about the intricacies of insurance or you’re a policyholder whose policy contains the term, read this blog to further break down the definition of “Act of God” to enhance your knowledge on its significance in the world of insurance coverage.

The History and Origins of the Term “Act of God”

Act of God is a term that exists in multiple spheres, including law. The term “Act of God” is used in secular statutory and case law to define unanticipated natural events for which no human is responsible. Generally speaking, it all boils down to “unexpected, unanticipated” and “unable to be controlled by humans.” The term originated as a legal defense back in 1581, where an early English court deemed that the death of a homeowner could result in a property deal becoming void. It has nothing to do with religion, despite that the expression once was literal and used religiously.

Stemming into the 1800s, the term began to be used by insurance companies and lawyers alike to describe events that would occur which were beyond human control. Nowadays, it’s used regularly in both fields, and even in fields like real estate, construction, etc. Still, that doesn’t mean everyone fully understands what it is.

Examples of “Acts of God” in Insurance

In Canada in 2022, severe weather caused $3.1 billion in insured damages. “Severe weather” can constitute an “Act of God,” seeing as it’s unexpected, unpredicted, and often beyond human control.

“Acts of God” can include all kinds of events that occur due to phenomena or natural forces. Here are some common examples of “Acts of God” that insurance policies typically cover:

Blizzards, Tornadoes, Wildfires, and Hailstorms

All of these weather events have been increasing in frequency due to climate change impacts. Ontario doesn’t see many particularly devastating tornadoes, but they have begun to touch down a lot more often. Similarly, wildfires and blizzards are increasing in frequency – and severity.

If you’re ever hit by a blizzard, hailstorm, fire, or tornado that causes a power outage, being prepared is the best thing you can do. Your preparedness can help to mitigate your losses and keep your family safe.

Geological Events: Sinkholes and Volcanic Eruptions

Now, as you might imagine, Ontario doesn’t have a ton of volcanic eruptions. However, if you did live in a country with active volcanoes, and you had insurance for these events, these would constitute as “Acts of God.” Similarly, sinkholes – characterized as sudden collapses of the ground due to erosion of underlying soil or rock – are not very common, but would fall under the definition of “Acts of God.”

Earthquakes, Hurricanes, Floods, and Tsunamis

Ontario has started to see increasing levels of earthquakes in the province, which typically average around 4.0 magnitude on the Richter scale. This certainly isn’t colossal, given the fact that earthquakes of 3.5 or below are seldom even felt, and those around 4.0 may be felt but rarely cause damages. However, as years go by, it is predicted that we might experience more devastating natural disasters. Hurricanes and tsunamis may not be on the radar for Ontario, but floods are also increasing in frequency (and severity).

Insurance companies assess the risks associated with “Acts of God” events based on historical data, scientific studies, and geographic factors. This evaluation helps determine the premiums, coverage limits, and deductibles associated with insuring against such occurrences. If you’re still unsure what events may constitute as “Acts of God,” call a broker.

Is an “Act of God” Covered by Home Insurance?

Depending on your policy, a lot of types of “Acts of God” are covered by insurance, but some may be excluded. As a result, you may assume that not all qualifiable “Acts of God” are insurable, but many – like hail, lightning strikes, fire, etc., are included. For certain options, like earthquakes and flooding, you may need to acquire an insurance endorsement to ensure that these events can be covered.

We always recommend reading over your policy to ensure you’re 100% certain on what is covered.  Understanding the examples of “Acts of God” that insurance policies typically cover enables policyholders to evaluate their own risk exposure and choose appropriate coverage options. It is essential to carefully review insurance policies, consult with insurance professionals, and ensure that the coverage adequately addresses the potential risks posed by these unpredictable natural events.

Working with an Insurance Broker to Define Difficult Terms

Working in insurance isn’t for everyone, but we’re glad to do the job! Everyone needs insurance in some way, shape, or form, whether that’s home insurance, auto insurance, or even sailboat insurance. When you do need insurance, it helps to work with an expert who can aid you in defining all the terms that you may not otherwise understand.

Working with an insurance broker is a sure-fire way to unravel all the mysteries and intricacies of insurance. Excalibur’s Defenders are experts in insurance whose priority is to protect you, i.e. the policyholder, against unexpected losses. Give us a call today if you have any terms contained in your policy that you are confused about or want someone with a bit of an “expert eye” to go over your coverage with you.