Business and Finance

Posts Tagged ‘Earthquake Insurance’

What do San Diego County residents have to know about Earthquake Insurance Policies, Risks and Costs?

Quality Claims Management views Earthquake coverage as catastrophic insurance. You will only need it if we have a really big earthquake. However, depending on where you live in San Diego and how much you have invested in your home, you may opt to get coverage. Here is what you need to know.

First, most standard homeowners, mobile home owners, condominium, and renter’s insurance policies DO NOT cover earthquake damage. Similar to flood insurance, earthquake insurance usually must be purchased separately.

However, fire insurance is part of most typical homeowners insurance policies. This means your home insurance policy may cover a significant part of the damage if your home burns down or is damaged in a fire that is caused by an earthquake.

Much of the damage that often arises from an earthquake happens after the ground stops shaking. Gas lines that may have ruptured and start leaking can catch on fire and burn your home to the ground. In San Diego County, it is also very possible that your home may be consumed in a wildfire sparked caused by earthquake motion many miles away. A power line may have collapsed. A home may have caught fire because of the quake and flames traveled many miles through brush to your home.

Another major factor is water damage. Quakes often break pipes. Even small quakes can crack a water or sewer pipe that floods your home and can cause extensive damage to your floors, rugs, furniture – even to the structure of your home.

If your homeowner’s insurance includes fire and flood damage, you should be covered for this “earthquake” damage – even if you don’t have earthquake insurance.

Another danger from earthquakes is landslides. You may or may not be covered for this. You need to check your homeowner insurance policy to make sure of your coverage for both landslide and fires. If your home does burn down, are you fully covered? Will you be able to replace your home and all of your belongings.

Check our other articles about homeowners insurance for details about coverages and what you need to know.

Where do you get Earthquake Insurance?

The law requires insurers that sell residential property insurance within the state of California to offer earthquake coverage to their policyholders. Most of these California earthquake insurance policies are backed and administered by a government organization known as CEA – the California Earthquake Authority.

Even though most earthquake insurance policies are sold by the state-run insurance pool, a few private companies also sell earthquake coverage. In order to provide earthquake coverage, insurance companies can become a CEA participating insurance company and offer the CEA’s residential earthquake policies or they can manage the risk themselves. To date, companies that sell over two-thirds of the residential property insurance in the state have opted to become CEA participating companies.

According to the CEA website, the CEA homeowners policy is designed to help get you back into your home after an earthquake. The CEA base-limits policy for homeowners includes:

Dwelling coverage – The coverage limit is the insured value of your home stated on your companion homeowner policy.
* Personal Property coverage – $5,000
* Additional Living Expense/Loss of Use coverage – $1,500
* You may select either a 10% or 15% deductible on your Dwelling coverage, and CEA’s increased-limit options allow you to increase Personal Property coverage to as much as $100,000 and Additional Living Expense/Loss of Use coverage to as much as $15,000.
Residential property insurance includes coverage for homeowners, condominium owners, mobile home owners, and renters.

Earthquake insurance is not intended for smaller losses as you must have enough damage to surpass your deductible. Even though deductibles are generally 10-15% of the amount of the Coverage A limits, it can be a little confusing to calculate the actual deductible amount since there are several factors that go into the formula.

How will your home handle an earthquake – Do you need Earthquake Insurance

- where in San Diego County do you live?
- what is under your house (rock, sand, fill, etc?)
- how is your home constructed – is it up to code and why that matters for your coverage

Age and type of construction contribute to how a residential structure reacts during an earthquake. Based on the scientific and engineering research, the CEA premiums reflect the following rating factors:

- In general, houses built on a slab perform better than those built on a raised foundation.
- One-story houses are less vulnerable to earthquake shaking than multi-story houses.
- Unreinforced masonry structures are more susceptible to damage than those of wood-frame construction.
- Houses of a certain age are not as strongly constructed as others.

The type of home you have affects your risk. One-story homes that are “tied together” — with the roof bolted to the walls, and the walls to the foundation — tend to survive earthquakes and windstorms better than multistory homes that aren’t. As you would expect, houses with big openings, such as plate-glass windows or large garage doors, fare worse than ones without those features.

In addition, your home can be substantially fortified with some special construction measures. For many, this can be a better investment than buying earthquake insurance.

The Institute for Business and Home Safety has a Fortified For Safer Living” program that specifies building techniques that can help homes better withstand disaster.

Other California Earthquake Insurance Factors

No Known Loss Letter Requirement

In areas that have been previously affected by an earthquake or other catastrophic event, an insurer may require a “No Known Loss Letter” with all requests for earthquake insurance or to add earthquake coverage to an existing policy. These kind of letters letter confirms that no known losses or damages have already occurred to the requested coverage location(s).

DIC Policy

DIC (Difference in Conditions) insurance provides coverage designed to close specific gaps in standard insurance policies. It allows coverage to be customized to extend to such exposures as water damage, flood, collapse, earthquake, landslide, etc., according to the insured’s needs. DIC coverage may be provided by means of a separate insurance policy or it may be added by endorsement to the basic policy.

Is Earthquake Insurance Right For You? How Much Equity Do You Have In Your Home?

As mentioned earlier, we view Earthquake coverage as catastrophic insurance. You will only need it if we have a really big earthquake. The more equity you have in your home, the more you need insurance.

According to UnitedPolicyHolders, a non-profit organization that fights for the rights of insurance consumers and educates individuals and businesses on how to get fair treatment, “a generally accepted rule of thumb is that you should not risk more than 10 percent of your liquid assets. A large earthquake could mean 10 to 100 percent of your home’s structure could be damaged or destroyed, up to 20 percent of your belongings could be damaged, and/or you may need to come up with $3,000 a month for temporary rent and relocation costs.”

In San Diego, we get lots of smaller quakes on a regular basis. These are reminders to YOU to review your current coverages to be sure that you are adequately insured. Is your current homeowner’s insurance up to date? Will it pay to rebuild your home to current building codes? Do you have additional coverage and riders for all the new stuff yiou may have acquired since you first bought your insurance policy?

Remember, it is far more likely you will have pipes break or fires start from the smaller earthquakes. If either of these happen, you should have coverage under your regular homeowners policy. Check to make sure it is up to date and that you have enough coverage. As a result of the 2003 and 2007 wildfires, we have found that most homeowners in San Diego are underinsured.

By the way, businesses should review their policies to be sure they have EQSL – or Sprinkler Loss coverage. There is a greater chance you will suffer damage from sprinklers leaking than from a building falling down.

by Ronald Reitz, President of Quality Claims Management

Earthquake home insurance, obviously, isn’t something that everyone needs. For those who do need it, however, it sometimes means the difference between a devastating, but manageable, crisis and a total financial loss. If your house or apartment is ruined in an earthquake, you can count on a lot of difficulties. Like fires, earthquakes can raze a structure to the ground. Unlike fires, there is little you can do to prepare for earthquakes. No matter how hard of a shake our best buildings can take, nature can always provide a shaking that’s just a little more severe.

Earthquake home insurance will even be required by mortgage underwriters in some areas. California mortgage lenders, obviously, may require that homeowners purchase such insurance. In some areas, an earthquake is among the likeliest disasters. While you’re always at risk of losing your home in such an event, you can ensure that you don’t lose your shirt, as well. A good insurance policy can cover a great many expenses, from reconstruction to the purchase of a new home to your expenses while you’re displaced. It can also cover the items within your home, which may almost equal the home itself in value.

Earthquake insurance is only the beginning of what a homeowner needs to have to mitigate their risk, however. Consider what happens after an earthquake. Oftentimes, the aftermath is more devastating than the earthquake itself. There are often fires, buildings that collapse long after the event, destroyed roads, ruined water and sewer systems and a host of other issues. In short, any significant earthquake is guaranteed to be a huge mess, both for the people who live in the affected area and for those who arrive to help clean that area up. This means that you’ll need other types of insurance if you’re to be truly covered.

Earthquake insurance will only cover the damage from the seismic event, according to the specifics of the policy. Expect those specifics to be agonizingly precise, as well. Insurance companies, however, are very experienced with these events and can tell you what additional types of coverage you’ll need to be protected in such an event. This may include fire damage insurance, damage from exposure to the elements and other possible threats. Insurance companies have to be very specific in their coverages, but they offer enough different types that you can get everything you need quite easily.

Since no individual can accurately predict the future, it can be a wise and sound option to hedge yourself from financial ruin. One of the easiest ways to do this is to purchase insurance. There are many types of insurance policies, one for each potential catastrophe. Some of the more common forms are life, auto, health, marine, accidental death and earthquake insurance. Within these types of insurance there are sub-categories for specific insurance protection. There is an insurance category specific to your needs. While there are many carriers for insurance, there are equal amounts of premiums. Researching before you purchase a policy can find you the best coverage for your need as well as the best price for your budget.

Within the life assurance category, you will find options such as term life, whole life and accidental death and dismemberment (AD&D) policies. Term life is a straight life insurance policy. You purchase the policy at a certain age and typically the premium remains the same as long as you keep it current. You will pay a monthly premium which when you stop paying, the policy expires. Whole life coverage is basically a term life policy in addition to some sort of savings plan. You pay your monthly premium, which is higher than a term policy, but a portion of your premium is set aside into a savings account. Typically these savings vehicles are a mutual fund. AD&D is often what employers will provide their employees at no cost. It is a policy where the beneficiary is paid only when the policy holder dies or loses one or more appendages within the policy’s strict guidelines. It is not a standard term policy.

Other common types of insurance policies are health insurance, auto insurance and marine insurance. Health care coverage comes in a variety of plans. You can have low deductibles with higher co-pays or high deductibles with low co-pays. There are many options among health care insurance and there is certain to be one that will meet your individual budget. Auto and marine insurance are straight forward. Auto insurance covers your motor vehicles while marine covers your watercraft.

One has to own the property that he or she wishes to insure. However you

can add your name to your parents’ insurance policy as an additional insured agent can come to you directly or it can be mailed to you.

Can a house be insured if it is still under construction?

In this case one should seek for a standard homeowners policy, construction fact should be informed to home insurance company.

What is home warranty insurance?

It is not an insurance; however some companies are trying to sell them.It covers repair cost for home appliances.

Where can one get earthquake insurance if he or she stays near California?

Options depend upon where one stays. The California Earthquake will sell coverage to those whose house does not have pre-existing earthquake damage.

Why do I need flood insurance?

If you stay in a federal state and have a home loan and most importantly if it a flood hazard area then federal law states will get you flood insurance.

Will there be a price hike if homeowner files an insurance claim?

Though one claim would not be affected but two would.

Is my personal computer and printer covered by homeowners insurance?

Some policies cover them. Limits on computers range from$2500 to $5000

When worth is more one can ask the agent about extra coverage.

How can one pay lower rates for homeowner insurance?

If a home is disaster resistant like having smoke detector, burglar alarms the owner will get discount.

What will happen if the home loan company has not received a copy of my homeowner’s insurance policy?

Contact the company or agent so that the lender receives the paperwork.

When should one call agent to find more coverage is necessary?

Any change in room like adding another room or buying jewelry or artwork.