Facts about Earthquake Insurance

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Facts about Earthquake Insurance

Recently I read an article indicating that a huge quake is more than likely in our lifetime in California. We know, the media lifeblood is panic and controversy – but this is an essential read if you’re living (or own a property) in California. What do you know about your Earthquake policy?

1- Exclusions – What are They and How do they Affect me?

Every policy will exclude certain items from coverage, or will impose a specific limit on how much the homeowner could be reimbursed for them. For instance, a typical homeowner’s policy will only cover jewelry to $1,000; firearms to $2,000 and silverware to $2,500.  Did your grandfather bring back a rare watch from Europe in World War II? Did your mother get a famous movie stars autograph in the 1940’s? Not only should you get these objects appraised, but you will need a separate rider to get additional coverage if your rare items exceed the aforementioned amounts. And, you’ll of course need to keep records (and scanned copies) of receipts/appraisals for such items. In addition, it’s wise to add locks and latches to china cabinets and use museum putty to secure precious breakables.

Also, Earthquake coverage generally does not cover the loss of these additions to your home: landscaping, pools, fences, and separate structures (including garages), as well as fragile housewares. Once again, talk about this is detail with your insurer and follow up with a letter.

2 – What is “Loss of use”?

A standard homeowner’s policy will reimburse the insured for alternate lodgings if you’re forced to move because your home has been damaged, generally to 20% of the dwelling limits – or will figure it on a set time period, such as 12 to 24 months following the event which caused the damage. Loss-of-use limits in quake coverage can be far less – again, discuss this and know about it beforehand. If you’ve got a family larger than 4 living in your home, you must consider “upping” your coverage, if you are able.

3 – Uncovered losses don’t count toward the deductible: All of the restrictions on quake coverage can create more in out-of-pocket expenses for the insured. So, if the damage reaches $75,000 in uncovered losses to your pool, fences, or patio, it will not help to satisfy the deductible.

4 – Are catastrophic claims common?

Total loss claims from fires are common, but they are not as frequent with earthquakes, as evidenced by the claims of California’s two biggest quakes – the 1989 Loma Prieta quake, and the 1994 Northridge quake. The Loma Pieta quake generated almost 45,000 claims, at an amount of just over $36,000 in today’s money, while The Northridge quake generated 195,000 claims with an average value of $60,500 in inflation-adjusted dollars.

5 – What are “Mitigating” risks:

The California earthquake authority gives homeowners discounts on their policies when they retrofit their older homes to better fit current earthquake standards — for instance, if you bolt the home to foundation; brace cripple walls with plywood and strap water heaters to the home’s structure – all which should be done in any event.

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