The through the state of California runs the legendary fault of San Andreas, made famous by it being the origin of the 1906 San Francisco earthquake. From the bottom of Oregon to southern California the effects of this great seismic were felt. It is no secret that it’s just a matter of time that the fault will again be the reason for yet another great quake, not to mention uncountable moderate and small quakes and those that originate from one of the myriad other faults that crisscross California and many other states throughout our country. For those who reside in such areas, earthquake insurance can a paramount consideration.
Earthquake insurance is a very specialized type of policy that homeowners can purchase to safeguard them from financial losses resulting from property loss or damage that is due to, as the name suggests, earthquakes. As certain areas are more prone to earthquakes than others, coverage is often not easy to obtain in certain areas. The expense of this coverage is determined primarily from the probability of major damage to your home. Note that this type of insurance is different from a typical policy that covers personal belongings and real estate property.
Earthquake insurance basically provides compensation to help cover the cost of repair or replacement of covered structures and personal property damaged or destroyed in an earthquake. It will not compensate for losses associated with other events, like fire, floods, or wind storms. This kind of coverage will often have a large deductible amount that will vary due to various factors.
Those who live in a more active seismic zone, (as mentioned above), can obtain this insurance from various insurance providers. The usual policy covers structural damage as well as any damage or destruction of covered personal property. Normally the personal property pay outs for losses are set at a specific dollar amount rather than comprehensive coverage for all possessions. The fact that personal items like furniture will often survive a tremblor intact (as opposed to a fire or flood in which everything will likely sustain damage) explains this. It actually goes some way in keeping costs down for both the policyholder and the insurance company. Items, such as a big screen TV, are far more likely to be damaged or destroyed in a quake, so insurance companies will often appraise the values of replacing these fragile personal belongings and then set a fixed dollar amount for one’s other property.
Earthquake insurance is usually determined based on a property’s actual value. For instance, a $200,000 home can be insured for its entire amount, especially if it is located in a higher-risk area. In this instance, the deductible will be pre-determined as a percentage of the total coverage, usually about 15 percent. The usual exceptions will include valuable jewelry, any landscaping and swimming pool improvements, and other buildings that are on the property like a shed or a garage.
There are two types of earthquake insurance offered. The first is “single-limit,” which can cover the entire appraised value of the primary structure. Another type is a standard policy that offers similar coverage to that which the homeowner already has, with the added benefit being that now the homeowner is protected from earthquakes whereas previously he or she would not have been. A very important aspect to keep in mind is how enormously big a difference there is between providing a 15% deductible and having to pay out-of-pocket for the total loss of property if one carries no coverage whatsoever. This means that having no earthquake insurance can be very hazardous to your financial health…