Property Insurance in An Earthquake Zone – OpEd


By Anders Timberson

Earthquakes cause a lot of damage to life and property every year, and it is a good idea to have yourself insured against damages caused by earthquakes, if you live in an earthquake prone zone. Earthquake insurance is a kind of insurance which applies to property: in case of damage to your property because of an earthquake, you will receive payment from your insurance company. There really is no need to go for such insurance against the effects of an earthquake if you live in a place where earthquakes never occur. To know what sort of a zone you fall into, it is a good idea to talk to an insurance company and enquire of them whether earthquake insurance is a good idea for you.

It is true that earthquakes are not very frequent, unlike other natural disasters, such as floods, but if you are a careful person, it makes sense to buy a property insurance policy that protects against earthquakes. Though many precautions are taken to mitigate losses causes by earthquakes, such as erecting earthquake-resistant buildings, great loss can be caused due to an earthquake. Your house is probably your biggest investment and most cherished asset: this is why you do need insurance to meet disasters of any sort.

Losses caused by earthquakes are not covered by ordinary insurance policies and you have to buy these separately after consulting with your insurance company. The reason for insurance companies not providing earthquake insurance as a matter of course is that an earthquake strong enough to destroy one house is sure to destroy many others in the vicinity, causing the company to pay a lot of money: a great amount of planning has to go into a property insurance policy that protects against earthquake damages so the insurance company can avoid taking high risks.

The prices for earthquake insurance depend on many factors: the risk of earthquakes in a region is only one such factor. Further, in many states, you will get some discount on the price of your policy if you try to mitigate losses: if you strengthen the structure of your house, strap water heaters etc. onto the structure of the house, you can expect a lower price on your policy. Wooden houses withstand earthquakes better and these will come with a lower premium than other houses. There are numerous other things that come into play to decide the premium of your policy, and you should ask your insurance company about all of these till you are satisfied about the step you should take.

Property insurance against earthquake has a high deductible. This means that payment in case of a house that is completely destroyed is good, but in case of some minor damages, the person insured will not gain too much. For example, the California Earthquake Authority lays down that there will be no payment if the damage to the structure of the house is less than fifteen percent. Be sure to check with your state’s insurance commissioner to learn more about an earthquake insurance policy and rules that apply in your state.

Anders graduated his MBA and has long experience working in a big local insurance company (as we say in Danish “forsikringsselskab”) and thinks it is good to share his knowledge and skills with the others. He also has deep interest in traveling and exploring the world and is passionate about cars.

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