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Earthquake Insurance: Coverage against damage due to earthquake. Earthquake insurance is an insurance coverage for damage of property caused by an earthquake of both volcanic and seismic origins. Property owners can use earth quake insurance to foot the expenses of damages since standard homeowner's insurance policy does not cover natural disasters. According to the United States Geological Survey, there is a 70% probability that an earthquake measuring 6.7 Richter or above will hit the San Francisco Bay area within the next 30 years. This earthquake will translate into $50 million in insured losses topping the 9/11 catastrophe losses. The currently modified Californian state law requires all insurance agencies selling home insurance in California to also cover earth quake damages. The earthquake insurance options depend on the location, claim history and the condition of the property.
Earth quake insurance Coverage - Earth quake insurance covers the expenses that are incurred for the repair or replacement of the damaged property. The coverage can also include garages, accessory structures and other personal property. The value of the personal property should be above $5000 or 10% of the insured property loss. Additional Living Expense (ALE) coverage of at least $1500 can also be included in the insurance coverage. The ALE coverage pays for alternate living quarters while the insured structure is being repaired or rebuilt.
Premium - The premiums are fixed based on the location and construction of the structure. Insurance agencies charge additional amount if the building does not meet the Building Code and Health Safety code specified for that locality. All insurance agencies thoroughly inspect the structure for retrofitting before deciding the premium. The average premium for a standard $200,000 home with a 15% deductible will range from $400 to $70, based on the zone classification of the locality where the house has been built.
It is prudent to go in for earthquake insurance even if you live in an area where earthquakes are not common. A basic homeowner's policy does not cover earthquake damage. It has been observed that Californians buy the most earthquake insurance. South Carolina Insurance News Service has recommended residents of the state to opt for an earthquake policy. Insurers for earthquake coverage are worried about the New Madrid Fault which runs through Arkansas, Kentucky, Missouri and Tennessee. Some aspects of insurance against earthquake coverage that you must look into:
- Find out if the policy will pay only for the contents of the home or also encompass additional living expenses in the event of extensive damage.
- You have to check if the policy covers only the dwelling or also takes into account accessory structures like garages etc.
- Check out the possible exclusions or limitations to the coverage.
- Find out if the policy helps in building the home again to current building codes.
- You need to clarify the coverage deductible before you finalize on the policy for insurance against earthquake.
Damages due to major earthquakes will potentially exceed safe financial guidelines and definitely need an insurance coverage even though minor earth quake damages may not need one. So if a house is constructed in an earthquake prone area like California, earthquake insurance would be a wise option.
Flood Insurance:
Flood insurance coverage is backed by the federal government and protects buildings in the Special Flood Hazard Areas (SFHA's) from loss due to flooding. Flooding in these areas can occur due to heavy rains, melting snow, inadequate drainage systems, failure of protective structures like dams, tropical storms or hurricane. Flood insurance is the best method to deal with damages caused by floods and is mandatory for houses built in the SFHA. According to the Federal Insurance Administration (FIA), only 25% of the homes in the vulnerable areas are insured against floods although flood insurance is relatively inexpensive compared to other forms of insurance. Another important factor to be taken into account is that flood insurance coverage does not go into effect until the completion of 30 days after the application of the insurance. So it is not possible to insure a property after the media broadcasts a flood warning.
Flood Insurance Coverage - The average flood insurance coverage ranges from $100,000 to $250,000 for residential buildings. The ideal coverage for a commercial structure is $500,000 for the building and $500,000 for its contents.
Premium - Structures located in the low to moderate risk localities can qualify for a Preferred Risk Policy (PRP) at a premium of $100 per annum. For coverage of $100,000, the premium ranges from $300 to $400 per annum. The premium for non-residential buildings is about $2,700 per annum for coverage of $250,000.
Insurance against flood seems to be relatively neglected by most Americans. According to the Federal Insurance Administration (FIA), there is 26 times more chances of a flood possibility than a fire during a typical 30 year mortgage. The average flood insurance premium was $353 in 2000. Those individuals residing in communities that are making concerted efforts to reduce flood risks can receive insurance against flood as a financial protection against losses from flood damage. Local governments are also stepping in to limit the chances of flooding and thereby lowering the financial risk involved. One of the effective ways of limiting the financial risks is by restricting the developmental activities in flood-prone areas. Efforts are being made to encourage construction practices that help reduce the impact of structural damages. Flood area management is a community exercise.
Insurance against flood can be purchased from most insurance agents and the US government backs this policy. The federal aid for damaged homes during flooding in the SFHA's must be repaid to the government. So, getting a flood insurance coverage is the safest and the most practical option for houses built in these regions.
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