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Earthquake Insurance

Earthquake insurance is a very specialized policy that homeowners can obtain to protect them from losses resulting from property loss or damage that is due to seismic activity. As certain regions are more prone to earthquakes than others, coverage is often not available in certain areas. The cost of this coverage is determined directly due to the probability that a quake can cause major damage to your home. This kind of insurance is not at all the same as a typical policy that covers personal belongings and real estate property.

What is Earthquake Insurance

Earthquake insurance essentially provides compensation to help cover the cost of repair or replacement of covered structures and items damaged or destroyed in an earthquake. It will not cover losses associated with other events, like fire, floods, or wind storms. This kind of insurance will often have a large deductible amount that will vary depending on the coverage amount purchased and, importantly, the location of the covered property.
Those who reside in a quake-prone area such as certain parts of California, can obtain this insurance from a myriad of insurance providers. The typical policy will cover structural damage as well as any damage or destruction of covered personal property. Usually the personal property compensation for losses is set at a specific dollar amount rather than comprehensive coverage for all possessions. This is due to the fact that personal items like furniture for example will often make it through tremblor intact as opposed to a fire or flood in which everything will likely sustain damage. This helps keep costs contained for both the policyholder and the provider. Items such as a big LED TV is far more likely to sustain damage in a quake, so insurance companies will often appraise the values of replacing these fragile personal belongings and then set a fixed dollar amount of coverage for that aspect of the policy.

How Coverage Amounts are Determined

Earthquake insurance is usually provided based on a property’s actual value. For example, a $500,000 home can be insured for the full amount, especially if it is located in a higher-risk area. In this case though, the deductible will be a pre-determined percentage of the total coverage, usually about 15 percent. The usual exclusions will include valuable jewelry, any improvements done to landscaping, swimming pools, and other structures that are on the property like a shed or a detached garage. There are exceptions, but in most cases these will not be a part of a standard earthquake policy.

Coverage and Benefits

There are two kinds of earthquake insurance available. The first is “single-limit,” which can cover the entire appraised value of the primary structure. Another kind is a standard policy that offers similar other coverage that the homeowner already has, with the exception 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 that there is a big difference between paying a 15 percent deductible and having to pay out-of-pocket the total loss of property due to having no coverage whatsoever. In other words, not obtaining earthquake insurance can be very hazardous to your financial health should the unlikely event happen in which a major quake strikes in your area.

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