Online Homeowners Insurance Quotes Company: Earthquake
|Earthquakes have occurred
in 39 states this century and approximately 90% of Americans
live in areas considered seismically active. Yet only a small
percentage of people purchase earthquake insurance. Even in
California, where earthquake fears are a daily fact of life,
only 17% of homeowners, and 20% to 25% of people in all types
of housing have earthquake insurance, according to the California
Earthquake Authority (CEA).
For some people, the issue should not
be whether to purchase earthquake insurance, but rather how
much to get. For others, the decision requires a risk assessment:
how likely is an earthquake, how much damage would it inflict
on you and your property, and how much can you afford to lose?
According to the U.S. Geological Survey,
there is a 70% 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 earthquake that killed 57
people and caused $20 billion in damage.) Not surprisingly,
Californians buy the most earthquake insurance. Quake insurance
premiums in California totaled more than $386 million in 1998,
according to A.M. Best, cited in an Insurance Information Institute
report. That was almost six times the business done in any other
state, and more than half the national total of $738 million.
The state with the second-highest earthquake insurance premiums
in 1998 was Washington, at just under $66 million. Missouri
was third at $38 million. While those numbers are higher than
in other parts of the country, people in all 50 states have
opted for earthquake insurance.
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. Does
the policy only cover the dwelling or are accessory structures,
such as garages, also included? Will your policy pay for the
contents of your home and for additional living expenses if
your home is badly damaged or destroyed? Are there any exclusions
or limitations to coverage? And, finally, what sort of deductibles
must you pay before the insurance kicks in?
How much does earthquake insurance
Earthquake insurance rates are determined
differently by each insurance company and can vary widely depending
on several rating factors. Generally, older homes cost more
to insure than new homes. Wood homes get better rates than brick
ones because they tend to withstand quake stresses better. In
addition, areas are graded on a scale of 1 to 5 for likelihood
of quakes, and this may be reflected in insurance rates offered
to homeowners in those areas.
Because earthquake insurance is a type
of catastrophic coverage, most policies carry a high deductible
-- usually anywhere from 5% to 15% of the value of your house.
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. It was
designed as a catastrophic umbrella after the 1994 Northridge
quake. Many insurance companies offer CEA's earthquake insurance,
which has a 15% deductible. Californians also can buy earthquake
policies outside the CEA.
How much earthquake insurance coverage
should I buy?
If you decide to purchase earthquake
insurance, remember that you should buy enough to cover the
costs of totally rebuilding your house and replacing broken
possessions. The amount of insurance you buy should be based
on replacement and reconstruction costs, not the fair market
value of your property and possessions.
You should also find out your rights
for filing claims before you
sign on the dotted line for earthquake coverage. It's especially
important to know how much time you have to file a claim following
a quake. This is because earthquake damage may not be apparent
for some time.