Tips for Finding Earthquake Insurance

Is your home covered against loss in case of an earthquake? While there are states that have no recorded earthquake activity, and others that have reported no seismic occurrences within the last 30 years, there are several areas of the United States where uncommon earthquakes have caused great damage. The New Madrid area of Arkansas, including a portion of Missouri, has experienced quakes of 7.0 and above on three occasions. The largest quake was an 8.0 that hit in 1812.  A 3.8 tremor was measured in the area as late as 1997. A 7.3 earthquake nearly leveled Charleston, South Carolina, in 1886, with damage reported in Alabama, Kentucky and Ohio. If your property is at risk, you should investigate whether you should purchase earthquake Insurance.

The standard homeowner’s policy lists specifically what it will cover. While you may be able to claim some of the collateral damage caused by an earthquake, the main damage may be excluded by policy language to this effect, “unless caused by earth movement/earthquake.” Earthquake coverage is written under a separate policy in most states.

The best place to begin your search for earthquake coverage is with your current insurance carrier. Most insurance companies will offer earthquake coverage. Premiums will vary according to your proximity to probable earthquake zones and the type of structure you are insuring. If your company’s premium is too high, or they don’t offer coverage, you can check with your state’s Insurance Commissioner’s office. If you search for a company online, be sure to check their record with the Office of Consumer Affairs or Consumer Reports.

Once you’ve found the company, you will have several options which will affect the premium. Most policies come with a flat-rate deductible. You should set this at an amount that you could reasonably pay, out of pocket, in the event of a loss. A higher deductible will result in a lower premium, as you are reducing the company’s risk exposure. Some policies list the deductible as a ratio, such as $2 for every $1,000 insured. In this instance, if you are insuring a $200,000 home, your deductible would be $400. The deductible cost could be overwhelming, under this structuring, if your home is valued in excess of $750,000.

You will also want to evaluate “loss of use” coverage in the plan you are considering. If a major earthquake were to hit your area, you could lose use of your home for up to a year while clean-up and repairs were being completed. You will also need to determine what additional structures, such as barns, sheds and even in-ground pools, are covered. Finally, you will should inquire as to how personal possessions are covered. Some companies will pay replacement costs, while others only offer a percentage or a set amount.

Take notes when you contact the various companies based on the above criteria. This will make selection of the best coverage for your personal situation much easier.