Earthquake Insurance

Earthquake is among the most severe natural calamities that causes massive scale of destruction to life and property. The occurrence of even a moderate scale of earthquake can cause loss exceeding billions of dollars. Wherever earthquake has occurred, people who survived had been left with nothing to live upon in most of the cases. Not only were they affected by losing house and other possessions and by complete destruction of the local economy for quite sometime, but also had to live in a miserable condition during the time taken for reconstruction and revival of normalcy. However many could come out of these situations and had been able to recover their losses as they had earthquake insurance policies and were able to make claims.

In your entire lifetime you might not experience earthquake ever, but if, god forbid, you do even for once, that single incident can take away all your tangible possessions leaving almost nothing to live upon. You will have to rebuild your home, make arrangements for every item of daily requirements and also your living expenditure will increase. May be you and other members of your family will have to bear more sufferings, your children’s education might suffer, medical bills will go up, you might loose rental income and many such things can happen. So how can you protect yourself from these disasters? What are the options available? Although there is hardly any way to prevent earthquake (though the damages can be minimized by using certain building materials, and moving away from the sensitive area when there is a warning), the best option to avail is to get earthquake insurance whereby you can get coverage for the losses caused by earthquake.

 
The standard homeowners or renters insurance policies do not cover earthquakes, although you may get coverage for accidents resulting from the earthquake such as fire or water logging. Coverage for damages resulting from earthquake is available either as endorsement to a homeowners or business insurance policy or in the form of a separate policy. Earthquake insurance is offered by many private insurance companies and in California, the California Earthquake Authority (CEA) offers this insurance. Unlike many other natural calamities, earthquakes do not occur in specific seasons. While an earthquake can be predicted (though every prediction might not come true), in most of the cases it occurs all of a sudden and causes havoc even before people realize the impact. Therefore early purchase of earthquake insurance will protect you from financial devastation caused by earthquake and help you to quickly resurge back to normal condition.

 
United States has large part of its area vulnerable to earthquakes, with around 5000 incidents of tremors being felt every year. Since 1900, while actual earthquake had occurred in 39 states of the country, damages of significant scale were caused in all the 50 states. It has been estimated that losses from earthquake may rise up to $4.4 billion dollars a year in US, with about 84 percent of the losses occurring only in California, Oregon and Washington, California being most vulnerable. The eight costliest earthquakes in US had occurred in California. Other regions that are at risk are the central United States which includes Missouri, Kentucky, Arkansas, Tennessee, parts of Illinois and Charleston. Other potential areas of high-loss are New York City, Salt Lake City, Portland, St. Louis and Seattle. The San Francisco Bay area and regions lying along the Pacific Rim are also highly prone to earthquakes. Therefore if you are living in any of these areas or have properties or business in these areas, it is strongly advised that you must get earthquake insurance before the worst happens.

 
In United States many private insurance companies offer earthquake insurance and also undertake extensive risk analysis and management studies before writing the insurance. As most of the devastating earthquakes had occurred in California, more earthquake insurance policies are purchased by the residents of this state. Under California Law, called the “mandatory law”, it is mandatory for insurance companies offering homeowners insurance to provide earthquake insurance as well. However, a “mini policy” allows the insurers to sell policies that will cover loss from structural damages caused by earthquakes and with 15% deductible. In the state of California, the California Earthquake Authority (CEA), a privately funded and publicly managed organization provides most coverage in the state.

 
Before you apply for an earthquake coverage it is useful to know the meaning of deductible. A deductible of a policy is the portion of the claim that the insurance company had not covered, and it is a rule that the insured must pay the deductible before the benefits of his insurance can be applied. To understand the concept clearly, suppose the cost of rebuilding a house is $100,000 and the deductible is 15%; then the insured must pay the first $15,000 (i.e., 15%) to avail the insurance benefit. Planes in the seismically active zones usually carry higher deductibles. Hence the higher the deductible is, the lower will be the liability of the insurance company and lower will be the premium.

Premiums depend on several other factors too, such as the location where the coverage is being provided, the condition of the house (older houes are more vulnerable to damage, and hence has higher premiums), the struicture of the house (reinforced structures have lower premiums) and many more.

If you are a resident of any of the seismically active zones you must consider purchasing earthquake insurance, which not only provides coverage against earthquake damages but also makes your future secured. A devastating earthquake can turn thousands of people into insolvent. Therefore planning in advance to get an earthquake policy can help you in the event of any worst thing happening in your region.