Hurricane Katrina, her stormy siblings, the recent Texas/Oklahoma brush fires and other natural disasters have sent the insurance industry scrambling for resources to pay claims in 2005. Consumers should expect premiums to remain high and claims difficult in 2006.

The 2005 losses amount to more than twice any previous yearly total of U.S. natural disasters and one-and-a-half times the losses from the 9/11 terrorist attacks. European reinsurance giant Swiss Re predicts that insurance companies will end up with insured losses of about $80 billion for the year (Hurricane Katrina will account for about $45 billion of the total, making it the most expensive insured event in history).

How best to cope with these financial problems? American families need to do more than just watch The Weather Channel -- they need to think like insurance companies. So says a new book, Protect Yourself: Using Insurance, Security Techniques and Common Sense to Keep Yourself, Your Family and Your Things Safe (Silver Lake Press).

The book points out that regional property insurance markets grapple continually with severe problems in financing disaster or catastrophe risk. In the end, many catastrophe risks are simply too difficult to insure. The result is diminished availability and high premiums.

For many insurance companies, the increased severity of the next disaster is compounded by the concentration of insurance policies in high-risk areas.

Why do these risks concentrate? "People like living near water, on hillsides and in urban areas, no matter how risky these places might be." So, they need to be prepared for disasters.

The book's authors offer the following tips for managing disaster risks:

• One way to "prefund" catastrophe costs is to prevent them in the first place though loss mitigation -- in other words, avoiding risks. Consider the risk issues when you think about where you plan to live, where you plan to travel or the car you plan to buy.

• If you live in an area that's prone to particular losses -- like earthquakes or floods -- inquire about specialty insurance coverages offered by the federal or state governments. For the population as a whole, these plans are bad deals; but, for people living in risky areas, they are usually worth getting. (Flood insurance is especially cost-effective.)

• Be aware that specialty insurance coverages usually work best when a home or other property is a complete loss. They don't work so well when there's minor damage.

• Pay attention to the "other" coverages in a standard homeowners or fire policy. The replacement of your structure is only the beginning of the protection these policies offer; they should also for personal possessions that are lost or destroyed�and temporary living expenses.

• Don't just buy insurance based on the lowest premium you can find. Cheap insurance is a waste of money if the company denies your claims. Check out the claims history (with your state's insurance department or an insurance-rating agency like A.M. Best) of a company before you buy its policy.

• The simplest way to prevent losses is to make sure your home and/or other structures are up to local building code. For example, roofing construction and materials determine windstorm losses more than any other single factor.

• Mitigation can be as simple as keeping your premises clean, putting away lawn furniture that can become projectiles in high winds�or avoiding flashy options on a car.

• Realize that not all losses can be insured. If you have a big family, collectible items or unusually valuable possessions, you may need to train them to respond to disasters calmly ... or find them secure storage.

Knowing how insurance companies identify and calculate risks -- and when they'll insure them and when not -- can tell you a lot about how you should respond. And that's the key to protecting yourself.

Referred from: (http://www.consumeraffairs.com)