Is It Necessary to Buy Earthquake Insurance for Everyone?
Every homeowners have a common question ‘Is it worth it to buy earthquake insurance?’ Earthquake insurance is one type of property insurance that pay insurance money for damage to the property at the event of an earthquake. Rates of policy depend on location and the probability of an earthquake. That may be cheaper for homes made from wood rather than homes made of brick.
Sometimes, it becomes a wide topic for discussion whether earthquake insurance should be taken or not. But after the event of an earthquake in the particular area, people rush to buy insurance. Some countries have made a rule of compulsory coverage of earthquake insurance, for example, Turkey.
In California, only 12% people are covered with earthquake insurance because of higher premium rates and denial. About 70% of earthquake coverage in California is underwritten by California Earthquake Authority (CEA) which provides $722 per year against catastrophic residential earthquake insurance. CEA is a public managed organization. It pays only if there is a structural damage higher than 15% of the insured value of home stated in an insurance policy, and not the market value of the home.
Most earthquake insurance has high deductibles either 10% or 15% with increased limit options that covered up to $100,000. According to the U.S. Geological Survey, 90% of Americans live in potential earthquake zones and it is the most costly disaster to recover.
Surviving from one quake does not mean that homeowner will immune from the next quake. Outdoor walls, pools, and windows can be destroyed, even if the home is built on bedrock and bolted to the foundation. Engineering repairs can cost up to $50,000. Moreover, don’t rely on federal funding and Small Business Administration loans because borrowing and paying those loans back is more costly than paying a premium.
Judge the policy by putting a cost of annual premiums, deductibles and extra financial cost for damage repair at one side, and on another side the cost of losing home without quake insurance. Keep in mind that if a home is purchased on loan and still you are paying installment, then you have to pay rest even if a home is damaged or destroyed in an earthquake.
Farmers Group, State Farm, Mercury and the Calif are participating insurers with California Earthquake Authority (CEA) from whom owners and renters can purchase such insurance in order to get additional earthquake policy from CEA. A complete list of participating companies is put on CEA’s Web site.
Rules of earthquake coverage are varied from state to state therefore contact state’s insurance commissioner before buying.
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