General Insurance
Natural disasters are able to do more damage to property and take more lives in one incident than any other thing that insurance protects against. Costs of damages reported from earthquakes are staggering, especially in the state of California. Many people think that damage from an earthquake is covered under their homeowners or renters policy, but this is untrue. That is why many people in high risk areas purchase earthquake insurance coverage.
What is it?
Earthquake insurance coverage is designed to help protect a family against a large financial loss due to an earthquake. Earthquakes are capable of destroying a home in a very short amount of time. The policy would cover for the loss of the home, its contents, other additions to the property, and often the cost of temporary residence if you are displaced while repairs are being done, or your home is being rebuilt. The policy is separate from a homeowner’s policy and the costs are different depending on the area you live in, and its earthquake risk. They often have a deductible, or co-insurance associated with them, which is normally between 10-20%.
How does it work?
Earthquake insurance coverage protects a family in many important ways. The first thing to remember is that a homeowner’s policy does not normally cover any loss associated with earthquakes. This means that if a person did not have an earthquake policy and their home was destroyed and it still had a loan on it, the family would still be responsible for the loan. In this situation there would be no other insurance policy to pay the mortgage company, or the company that financed other loans attached to a home. Also, the family would be responsible for purchasing new furniture, clothes, and finding and paying for another place to live, all the while paying back all the associated loans. This situation could become extremely financially crippling for a family. In California, this coverage can often times be purchased directly from the insurance carrier that insured their home as a separate policy, or from a company associated with the California Earthquake Authority.
How much do you need?
Many people may think they live in an area where there will not be an earthquake, even some families in California. However, there are several areas of the country (the Midwest and Southern areas), and most areas of California that are expected to have an earthquake in the coming future. When deciding to purchase earthquake insurance coverage, a family will want to evaluate how much the contents of their home would cost to replace, and how much it would cost to rebuild their home. They would also want to evaluate the availability of coverage for temporary displacement, and also how much equity they have in their home.
Expert Tips and Info
One thing someone looking for earthquake insurance coverage may want to consider is a mini-policy, which excludes coverage for structures such as pools and sheds. The costs of these policies are less and will still make sure your family has somewhere to stay after an earthquake. Also, in California, if someone suffers an earthquake loss and does not have an earthquake policy, they may qualify for a low interest loan to assist them in getting back on their feet. One should also consider that if they live in an older home, or wood based home, their premiums may cost more due to the higher possibility of damage from an earthquake.