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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 cost?
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.
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