An earthquake by definition is an impromptu but violent shaking of the earth’s surface due to breaking rocks beneath the earth surface. This violent movement causes avalanches, fires, landslides, flash floods and tsunamis. Earthquakes are a major concern since, as opposed to other natural disasters like Hurricanes, Earthquakes do not have specific seasons and can come any time. In the United States, earthquakes are not included in the standard insurance package for homeowners or businesses. Insurance coverage usually comes in form of an endorsement to a home or business insurance policy. From statistics, there are about 20,000 earthquakes annually in the U.S alone. The U.S Geological Survey also indicates that the earthquakes are mostly small, and a total of 42 states are at risk of quakes.
What is Earthquake Insurance?
In broad terms, earthquake insurance is a form of property insurance that pays the insurance holder in the event an earthquake damages their properties. Several earthquake insurance policy providers include a high deductible in their packages making this type of policy suitable in cases that the entire home is destroyed. However, it is also worth noting that this kind of insurance policy is not so useful if the home is just slightly damaged. Moreover, the rates of insurance depend on the policy holder’s location and the probability of an earthquake in the location. On the same note, rates have always been found to be relatively cheaper for houses constructed with wood, which are reputed to withstand earthquakes better than those made of bricks.
Previously, the loss caused by earthquakes was examined with the help of mass inventory data and was largely based on experts’ opinions. More recently, however, the activity is carried out using a Damage Ratio, abbreviated as DR. This is a ratio of the earthquake damage money amount to the total value of a structure or building. Together with this method, the use of HAZUS is another useful method of evaluating such damages for insurance purposes. HAZUS is a computerized loss approximation procedure.
What is Included in Earthquake Insurance?
Due to its sensitivity and the high level of risk, most earthquake insurance policy providers issue the policy in 3 main parts. The first part deals with your dwelling coverage. This coverage is meant for your home up to a particular amount known as the limit. The limit on the earthquake insurance is equal to the limit on the homeowners insurance or the dwelling coverage. The second part is that of personal property coverage which is concerned with things in the home like computers and furniture. Here, things like china and crystals are never covered. The third and last part is that of additional living expenses or loss of use. This covers temporary and extra costs to live somewhere else while your area is evacuated or while your home is repaired.