Should Homeowners Purchase Earthquake Insurance?

Given the deadly earthquake that struck Haiti in January, more focus has turned to the potential cost of U.S. earthquakes, which has been on the rise due to the growth in urban development in seismically active areas.

Coupled with the vulnerability of older buildings that may not have been constructed or upgraded to present building codes, and you have the potential for not only loss of life, but financial disaster.

According to information from the Insurance Information Institute (I.I.I.), a large number of homeowners residing in seismic zones choose not to buy earthquake insurance. I.I.I. reports less than one-fourth of California homeowners possess earthquake coverage.

Since earthquakes are not covered under standard U.S. homeowners or business insurance policies, coverage is often available for earthquake damage in the form of a supplemental policy to homeowners or business insurance.

Homeowners should keep in mind that standard homeowners and business insurance policies may cover losses resulting from a fire after an earthquake. That compensation could include added living expenses along with business interruption coverage.

Earthquake insurance policies many times carry a deductible, typically in the form of a percentage as opposed to a dollar amount. Consumers will find deductibles falling in the range of 2 percent to 20 percent for the structure’s replacement value.

For those living in California, residents can also obtain coverage from the California Earthquake Authority (CEA). The CEA makes available homeowners dwelling coverage deductibles of either 10 or 15 percent. The CEA coverage limit is the insured value of an individual’s residence as noted on the companion homeowners’ insurance policy.

Consumers need to know that earthquake insurance premium rates are decided differently by each insurer and can run the gamut. Deciding factors can include the locale of the building and what materials were used to construct the building in the first place.

While each consumer must decide if earthquake insurance is right or not for them learning about it is definitely worth their time.