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Earthquake Insurance...

 house damage from earthquake

The first 2 months of 2010 featured two major earthquakes, in Haiti and in Chile, that caused much damage and many deaths.  In March of 2011, Japan was stuck by a major 8.5 magnitude earthquake and devastating tsunami.  And, on August 23, 2011, the East Coast of the US was hit by a 5.8 earthquake. The latest upheaval was the 5.6 Oklahoma earthquake that struck the state on November 5, 2011.

If the Charleston area were to experience a repeat of the catastrophic 7.3, 1886 earthquake, would your insurance policies provide the protection you need?  Here are some answers to questions you may have.

But be sure to understand that all insurance policies are not alike and you must read your policy and/or speak to your agent to determine your exact coverages.



Does my home insurance policy automatically include earthquake insurance?

Generally speaking, the answer is no. The typical homeowners policy does not include earthquake insurance. Damage done by an earthquake is specifically excluded.

Some condominium unit owners (HO-6) policies do include earthquake insurance but you must refer to your particular policy to see if an earthquake endorsement form has been attached to the policy.


Does my auto insurance policy automatically include earthquake insurance?

Yes, automobile insurance policies provide earthquake coverage as long as comprehensive (other than collision) insurance applies to the damaged vehicle.


Does a commercial insurance policy for my business automatically include earthquake insurance?

In almost all cases, the answer is no. Damage caused by an earthquake is specifically excluded. The exception is if you have a Difference in Conditions (DIC) policy. Most DIC policies do include earthquake insurance.


How can I obtain earthquake insurance?

Many insurance companies allow earthquake insurance to be added to the homeowners or commercial policy by endorsement, with an additional charge for the insurance. You should contact your company to see if they offer earthquake insurance.  

There are several insurance companies that issue a stand alone earthquake policy. In other words, they do not require you to have any other insurance policies with them. These companies are usually ones like Lloyds of London.


What is the usual deductible for earthquake insurance?

The vast majority of insurance companies offer earthquake insurance with a percentage deductible, ranging from 2% to 15% or higher. This percent is a percentage of the amount of insurance on the building. For example, a policy insuring a home for $500,000 with a 5% earthquake deductible has a deductible in the amount of $25,000.

One caution here. Read the endorsement providing earthquake coverage very carefully as many companies make the deductible apply separately to building and contents. Thus in the above example, if your homeowners policy included $250,000 contents coverage, a second deductible of $12,500 would also apply to the contents portion of the claim!  

At least one Lloyds of London market offers earthquake insurance with a flat $1,000 deductible that applies separately to building and contents.


Are there any other oddities about earthquake insurance about which I should be aware?

Yes, a few companies will provide earthquake for a brick veneer structure but their endorsement states that the bricks are not covered! In the aftermath of an earthquake, you may find yourself with a pile of bricks around your home and no insurance coverage! Be sure to read your policy! Some companies will allow you to buy back the coverage for the bricks.


Is an earthquake a real threat in the Charleston area?

A major Earthquake struck Charleston in 1886 and that fault line runs generally from Ravenel area to Summerville. The Charleston area experiences many minor tremors each year, most so minor we do not feel them. There are several good internet sites that discuss the threat. Here are a few...


Is earthquake insurance expensive?

The Charleston area does have fairly high earthquake rates. The rates for a frame or wooden building are much less than the rate for a brick veneer or other masonry building. As a very general guide, the earthquake rate for a frame house would be $1.00 per thousand and for a masonry building, $3.00 to $5.00 per thousand. For example, earthquake insurance for a frame house insured for $300,000 would cost about $300 annually. Your agent can give you an exact quote.


Is damage done by an aftershock considered a separate claim?

If the aftershock occurs within a certain time frame after the earthquake, damage done by the aftershock is considered the same claim as the original earthquake. Most companies use a time period of 168 hours, or 7 days.


Is tsunami insurance included in earthquake insurance?

No, you must purchase a flood insurance policy through the National Flood Insurance Program in order to have coverage for the “big wave”. If you would like more information about tsunamis, you can click here to go to NOAA's website to find out more.


Many times, in the aftermath of an earthquake, we see pictures of buildings on fire.  Do I need an earthquake policy to have insurance for a fire caused by an earthquake?

No, the earthquake policy excludes coverage for loss due to fire “…even if attributable to an earthquake…”. Your homeowners policy, dwelling fire policy, or commercial property policy will provide the fire insurance coverage.


Please call your agent at C. T. Lowndes & Company today!!

 

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