The 411 on Earthquake Insurance
Earthquake insurance is a highly specialized policy that homeowners can purchase to protect themselves from losses resulting from property damage or loss due to seismic activity. Ascertain regions are more likely to experience earthquake activity than others, coverage is sometimes not offered in certain areas. The cost of this coverage is determined directly due to the probability that a quake will cause major damage to your home. This type of insurance is different from a typical policy that covers personal belongings and real estate property.
Earthquake Insurance Defined
Earthquake insurance provides compensation to help cover the cost of repair or replacement of covered structures and items damaged or destroyed in an earthquake. It will not cover losses associated with other events, like fire, floods, or wind storms. This type of insurance will normally have a large deductible that varies depending on the coverage level purchased and, critically, the location of the covered property.
Those who reside in a quake-prone region such as California can carry this insurance from a myriad of insurance providers. The typical policy will cover structural damage as well as any damage or destruction of covered personal property. Usually, the personal property payout for losses is set at a specific dollar amount rather than comprehensive coverage for all possessions. This is due to the fact that personal items like furniture for example will often make it through a quake intact as opposed to a fire or flood in which pretty much everything will likely be damaged. This helps keep costs down for both the policyholder and the provider. A big-screen TV is far more likely to sustain damage in a quake, so insurance providers will often appraise the values of replacing these fragile personal item s and then set a fixed dollar amount of coverage for that component of the policy.
How Coverage Amounts are Decided
Earthquake insurance is usually determined based on a property’s actual value. For example, a $500,000 home can be insured for the full amount, especially if it is located in a higher-risk area. In this case, though, the deductible will be a pre-determined percentage of the total coverage, usually about 15 percent. The usual exclusions will include valuable jewelry, any improvements done to landscaping, swimming pools, and other structures that are on the property like a shed or a detached garage. There are exceptions, but normally these will not be a part of a standard earthquake policy.
Benefits and Coverage
There are two types of earthquake insurance available. The first is “single-limit,” which can cover the entire appraised value of the primary structure. Another kind is a standard policy that offers similar coverage to that which the homeowner already has, with the exception being that now the homeowner is protected from earthquakes whereas previously he or she would not have been. It’s important to remember when considering this coverage how big a difference it can be between paying a 15 percent deductible and having to pay out-of-pocket for the total loss of property if one has no coverage at all.
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