No matter where you live or what’s the weather there, your property is likely to get damaged by Earth Movements. 42 out of 50 States in the United States have a reasonable likelihood to face an earthquake. In accordance with a report presented by the U.S. Geological Survey (USGS), more than 5,000 earthquakes occur in the United States each year. It’s surprising that with such a great risk of earthquakes looming over the heads of homeowners and other property-owners, only 8 percent of the mortgage holders have earthquake coverage included in their policies. Earthquakes can probably cause the worst type of damage to your property.
Statistics show that in 1994, an estimated loss of $44 billion was caused in the southern part of the state of California due to the Northridge earthquake. This was the costliest earthquake in the history of the United States. Earthquakes pose a very serious threat to your real-estate properties. From floods and tidal waves to torrential slides and avalanches, anything can happen due to an earthquake. And the worst part is that earthquakes do not really have timings. They can occur at any time of the year. There is no such thing as the earthquake season. While it is true that earthquakes incessantly happen to the west of the Rocky Mountains, they don’t really have a specific geography to target. Nearly the whole of the United States is vulnerable to tremors. However, the eastern states of the country are less likely to have earthquakes.
The loss caused by earthquakes was evaluated by using mass inventory data. It was mostly based on the opinions of professionals. Now, the evaluation methods have changed significantly. These days, earthquake losses are estimated using a Damage Ratio (DR). A Damage Ratio (DR) is basically a ratio of the money required to remediate the damage caused by the earthquake to the total value of the property. Other digital loss estimation methods like HAZUS are also used.
Whether you live in an earthquake-prone area or not, you should have earthquake coverage included in your standard homeowner’s insurance policy. However, having an earthquake coverage becomes a prerequisite if you do live in an area that is more prone to have tremors. You can either buy an all-risk homeowners’ insurance policy or a separate policy for earthquake protection. The separate policy for earthquake protection is called Earthquake Insurance. They are particularly useful if an earthquake destroys your entire property. However, this may not be very useful if your property is simply damaged.
One of the many reasons that account for the lack of purchasers of the earthquake insurance around the United States is its cost. Earthquake insurance typically comes with high cost and limited coverage. This disincentive makes people include some sort of earthquake coverage in their homeowners’ insurance instead of buying a separate insurance policy altogether. People whose properties have never been damaged by an earthquake often take this insurance policy for granted. Earth movements can be deemed as highly dangerous but low-frequency events but, you should always be prepared. Another reason that acts as a deterrent to people buying earthquake insurance is lack of clarity. People are often not clear about what is covered and what is not covered by an earth movement insurance policy. Factors like lack of priority and false hope for assistance by the government also account for the lack of buying of earthquake insurance.
How much does the Earthquake Insurance cost?
The cost of Earthquake Insurance varies from state to state. States that are more likely to have Earthquakes usually charge higher premiums. The amount of premiums for Earthquake Insurance may be lower for wooden houses as wood is better at withstanding earthquakes than bricks. Earthquake Insurance is comparatively expensive than an all-risk homeowners’ insurance as earthquakes cause catastrophic damage. The damage caused by an earthquake extends to all properties in the area.
Why is Earthquake Insurance important?
Post-earthquake loss can be devastating and the financial burden that it comes with can aggravate your situation. Earthquakes do not only pose a threat to your household property but also your commercial property. Earth movements, whether small or big, are extremely dangerous for the society in general. People who sign up for Earthquake Insurance or a supplemental Earth Movements coverage in their residential insurance policy can transfer the risk of the damage that comes with earth movements. Earthquake coverage acts as a pre-catastrophe funding tool that helps in post-catastrophe recovery by limiting the economic impact of the disaster. Earthquake losses are paid from funds put together through insurance payments. The premiums are set in proportion to the risk exposure. This basically allows financial risk diversification. However, the amount of risk that insurance companies are willing to accept for any single region is limited so that the companies are also protected from lack of financial stability caused by ‘adverse selection’. Adverse selection basically means that people who live in earthquake-prone areas normally buy earthquake insurance.
Supplemental Earthquake Insurance Inclusion
You can also have your standard insurance policies supplemented with an earthquake coverage. This inclusion typically has a deductible of 10% of the total insured value per area. However, it must be noted that this inclusion is not available in all states. This is accessible in 45 out of 50 states in the U.S. The states that do not offer this inclusion are Illinois, Hawaii, Alaska, Florida, and California.
Tips to Reduce Additional Losses
At times, small tremors occur that do not cause any major damage to the building structure. However, they end up causing damage to the contents kept inside or outside the building. Here are the following tips you can follow to mitigate losses to your belongings in case of tremors:
- Firmly anchor freestanding closets, cabinets, and other furniture to walls.
- Use hooks, braces, and loop closures to secure electronic devices to surfaces like tables and floors.
- Coat your glass-windows, dividers, and any other entryways with defensive coating so that they can withstand breakage.
- Use flexible lines in your plumbing system instead of rigid supply lines.
Besides these, there are many other things you can do to mitigate additional damages to your property. Earthquakes are not possible to avoid. They occur when they occur. However, you should make sure you are fully prepared if you are paid a visit by this catastrophic disaster.