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USAinsurance.com
Possibly the most
important thing to know about earthquake insurance is this: A basic homeowner’s
policy does not cover earthquake damage. Even if you don't live in an
area where earthquakes are common, it's possible you might need earthquake
insurance. Since the beginning of
the 20th century, earthquakes have occurred in 39 states. Approximately 90
percent of Americans live in areas considered seismically active. Even so,
only a small percentage of people purchase earthquake insurance. Even in California,
where earthquake fears are a daily fact of life, only about 12 percent of
homeowners have earthquake insurance, according to the California Earthquake Authority
(CEA), down from 30 percent in 1996 when the state legislature created the
CEA. Each year, more homeowners get rid of earthquake coverage than buy it
because, according to consumer groups, they believe the policies cost too
much and cover too little. Why buy earthquake
insurance? According to the U.S.
Geological Survey, there is a 70 percent probability that one or more
damaging earthquakes of magnitude 6.7 or larger will strike the San Francisco
Bay area during the next 30 years. (A magnitude 6.7 earthquake is equivalent
to the 1994 Northridge, Calif., earthquake that killed 57 people and caused
$20 billion worth of damage.) Homeowner, condo and
rental insurance policies do not cover damage caused by an earthquake, but
coverage can be purchased as an endorsement or a separate policy. Earthquake
insurance can be quite inexpensive depending on where you live. Contact your
insurance agent or company to find out what the costs would be for your home. Not surprisingly,
Californians buy the most earthquake insurance but earthquake insurance has
been sold to residents of all 50 states. The Earthquake
Education Center at Charleston Southern University claims there's a 40 to 60
percent chance of a major earthquake somewhere in the eastern United States
in the next 20 years. That has prompted the South Carolina Insurance News
Service to recommend residents of that state consider purchasing earthquake
policies. The New Madrid Fault,
which runs through Arkansas, Kentucky, Missouri and Tennessee, also has
insurers worried. According to the Insurance Information Institute, there's a
40 to 63 percent chance the region will suffer an earthquake with a 6.0
magnitude in the next 15 years. The availability of earthquake coverage has
become an issue in some regions of those states. For those who don't
remember, which would include anyone not alive in 1811, an earthquake struck
the New Madrid area with enough force to change the course of the Mississippi
river and ring church bells on the east coast. "The potential
magnitude of a catastrophic New Madrid quake dictates that we approach the
preparedness on a regional basis," says W.R. Padgett, board chairman of
the Central United States Earthquake Consortium. "No one state can
possibly begin to address all the issues." What does earthquake
insurance cover? Ideally, your
earthquake insurance policy should cover the cost to replace or repair your
damaged property. There are several options to consider when picking a plan,
including:
How much does
earthquake insurance cost? Earthquake insurance
rates are determined differently by each insurance company and can vary widely
depending on several factors. Generally, older homes cost more to insure.
Wood homes get better rates than brick buildings because wood tends to
withstand quake stresses better. In addition, areas are graded on a scale of
1 to 5 for likelihood of quakes, and this might be reflected in earthquake
insurance rates. Because earthquake insurance is a type of catastrophic
coverage, most policies carry a high deductible — anywhere from 2 to 20
percent of your replacement coverage limit.
For residents of California,
one option is to get insurance through the CEA. The CEA is a state-sponsored
private-public partnership providing earthquake insurance to California
homeowners, renters and condominium owners. Insurance companies that belong
to CEA offer a standard earthquake insurance policy with a 15 percent
deductible. There's also a 10 percent deductible policy available. The
CEA
Web site has a tool to calculate your estimated annual earthquake
premium. Californians can also buy earthquake policies outside the CEA. How much earthquake
insurance coverage should I buy? If you ultimately
decide to purchase earthquake insurance, remember you should buy enough to
cover the costs of rebuilding your house and replacing broken possessions.
The amount of insurance you buy should be based on replacement and
reconstruction costs, not the market value of your property and possessions. You should also find out your rights for
filing claims before you sign any earthquake insurance policy. It's
important to know how much time you have to file a claim following a quake.
In some cases, damage from earthquakes is not immediately apparent.
Please Note: The information contained in this Web site is
provided solely as a source of general information and
resource. It is a not a statement of contract and coverage may not
apply in all areas or circumstances. For a complete description of
coverages, always read the insurance policy, including all endorsements. |