Earthquake Insurance 101

With the recent earthquakes happening all around the world, it is a wise decision if we prepare well to against any force majeur (e.g. natural disasters.)

Over the years, the insurance industry has expanded to cover almost any thinkable disasters commonly occur in human’s life. In term of disaster insurance, earthquake insurance is one of such policies covering us from losses incurred due to earthquakes or any earth’s surface movement, such as landslide, mudslide, mudflow or sinkhole.

Earthquake insurance has its own limitation, though. It excludes coverage on losses caused by floods and tidal waves (e.g. tsunami,) even if the said disasters are occurring along with an earthquake. Moreover, the earth insurance also excluded from the homeowner and tenant insurance policies coverage – both are different and should be applied separately.

Unlike other homeowner policies, earthquake insurance mainly covers significant losses. The claim is normally paid after calculating all deductibles – generally between 10 percent and 25 percent.

The earthquake insurance payment structure resembles auto insurance’s. The claim is paid for damage that exceeds the deductibles. Some earthquake insurance policies consider the structure and the contents as different entities – in this case, deductibles are applied separately.

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Just like any other insurance providers, some earthquake insurance providers are applying strict rules before issuing any policies. They require property inspection before they sign a deal and issue the policy. For example, many earthquake insurance providers require for a home to be securely bolted to the basement. They also consider interior walls’ bracing (how fixtures are attached to the wall.) Of course, it’s only common sense to have things at their prime before inviting the insurance provider for a home inspection.

If an earthquake occurs, the earthquake insurance policies will be issued once, and no more will be issued until the situation is cleared by the authority. So, further damaging aftershocks won’t be covered, unless they happen after authority declared the natural disaster has passed.

After the damage has been done, you can start making the claim, bringing along the supporting documents with you – all done in a certain time-frame stated in the insurance company’s terms and conditions.

We should consider the circumstances before applying for earthquake insurance. If your house is situated in a low risk area, your might tend to overlook such insurance. However, the basic rule of thumb says that preventing is always a good thing, especially in term of protecting most of us’ biggest assets.

Image by Hey Paul.