In New Zealand, where damages from a deadly earthquake could exceed $12 billion, about 90 percent of homeowners have earthquake insurance. By contrast, only about 10 percent of homeowners in California — the state most at risk of being rattled by a major quake — carry earthquake insurance.
That disparity underscores the fact that millions of Californians — and millions of other Americans, for that matter — are unprepared for the Big One in terms of insurance coverage.
Most homeowners may not realize it, but at least 39 states are considered at risk of being hit by a moderate to severe earthquake. As of Feb. 15, for example, at least five dozen small and moderate quakes had struck Arkansas during 2011.
Unlike damage from a fire, a hailstorm or a snowstorm, few homeowner’s insurance policies cover damage from earthquakes. This means that if a temblor strikes and you don’t have an earthquake insurance policy, you’ll have nothing to cover your losses.
Home policies typically don’t cover quakes
Only about 10 percent of homeowners in California carry earthquake insurance.While policies are fairly easy to obtain, they have extremely high deductibles, high premiums and offer relatively little coverage, leaving some to wonder whether earthquake insurance is actually worth the price.
“There is widespread belief among homeowners that earthquake insurance is included in their policy, but it almost never is. It’s an add-on that you have to buy. Most homeowners are just not covered,” says Rich Roesler, a spokesman for the Washington State Office of the Insurance Commissioner.
In California — the mother of all U.S. quake zones — 70 percent of all earthquake policies are underwritten by the California Earthquake Authority. As a nonprofit, tax-exempt organization, it was set up by the state when many insurers left the market after the 1994 Northridge Earthquake. That quake caused more than $15 billion worth of damage.
Glenn Pomeroy, CEO of the Earthquake Authority, says only about 10 percent of California homeowners have earthquake insurance.
“It is probably a little harder for people to realize earthquake risk because, unlike hurricanes, they don’t happen every year. Part of our task is to make people aware,” Pomeroy says.
Industry experts say many homeowners are not aware that their home insurance policies generally do not cover earthquakes. Away from the quake-prone West Coast, many Americans may not even realize they live in a seismic area.
According to the U.S. Geological Service, states where residents should worry most about quakes include California, Washington, Oregon, Arkansas, Alabama, Illinois, Missouri, Tennessee, Arizona, Montana, Nevada, New Mexico, Utah, South Carolina, Alaska and Hawaii. About 5,000 earthquakes hit the United States each year.
Although an earthquake can cause tremendous damage hundreds of miles from the epicenter, few homeowners in any of those states are financially prepared and protected.
The costs of earthquake insurance
Deductibles for earthquake insurance can range from 2 percent to 20 percent of a home’s replacement value, according to the Insurance Information Institute. This means that if it costs $200,000 to rebuild a home and the policy has a 2 percent deductible, the policyholder would be responsible for paying the first $4,000.
Earthquake insurance covers the structure of a house, its contents and additional living expenses in the event of an earthquake. But because of the high deductibles, the insurance is viewed by many homeowners as too costly. The California Earthquake Authority has 811,000 policyholders in a state with roughly 37 million residents.
Cars and other vehicles are covered for earthquake damage under the optional comprehensive portion of an auto insurance policy, according to the Insurance Information Institute.
The recent earthquake in New Zealand caused billions of dollars in damage, making it one of the worst quakes in modern history.Outside California, earthquake insurance is offered by private insurers or by public co-ops like the California Earthquake Authority. Some of the country’s main providers of quake insurance include GeoVera, State Farm, USAA and Liberty Mutual.
Earthquake insurance premiums can vary dramatically depending on home’s location, age, construction type and other factors. Across the board, an average annual premium for earthquake insurance in California is $813, but it can be substantially lower or higher for homeowners. Insurers rely on data from seismic experts to develop computer models that predict when and where major quakes could happen, and how much damage could be caused.
Pomeroy notes that if you own a home along the earthquake fault line in the San Francisco area, insurance will cost considerably more than if you own a home in Sacramento, which does not lie near a fault.
Roesler, the Washington official, cautions that earthquake insurance may or may not cover other damage caused by earthquakes. This can include fires sparked by quakes or floods spawned by quake-related tsunamis or tidal waves.
In Washington state, the market for earthquake insurance is relatively minuscule. In 2009, direct premiums written in the state totaled only $113 million, compared with the $1.3 billion in homeowner’s policies that were written. Regardless of whether one purchases earthquake insurance, Roesler recommends that people look into retrofitting their homes to shore them up in case of a quake. In fact, he says, retrofitting may be required before homeowners can buy earthquake insurance, especially those who live older houses.
When it comes to earthquake insurance, California’s Pomeroy says, “people often view these policies as quite expensive with a high deductible. It’s completely voluntary for a risk that is out of mind and does not happen very often.”
Despite the expense, the Insurance Information Institute makes an observation that may make it worth considering earthquake insurance if you live in a quake-vulnerable state:
“The potential cost of U.S. earthquakes has been growing because of increasing urban development in seismically active areas and the vulnerability of older buildings, which may not have been built or upgraded to current building codes.”
–Craig Guillot
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Filed under insurance by on Mar 4th, 2011. Comment. 
When you go shopping for insurance it’s going to feel like they’re throwing a thousand different types of homeowners insurance policies at you in the hope that you’ll be able to field the right one based on nothing but luck. Since it doesn’t work like that, it pays to be familiar with the most common types of homeowners insurance policies before you get tossed into the arena to sink or swim!
Common Homeowners Insurance Policies
a) HO-1. If you’re looking for basic coverage for your one room shack that cost less than $25 to bribe the turtle down the beach to build (or you have another structure that you only want very basic coverage for) the HO-1 is the homeowners insurance policy you’re looking for. The only thing this type of policy covers is fire and lightening damage, so don’t expect too much!
b) HO-2. This type of coverage is known as “broad coverage.” Broad coverage protects your home against fire and lightening, as well as windstorm or hail, theft, explosion, smoke, damage from vehicles and/or aircraft (although why they’d be in your living room, no one really knows), vandalism, malicious mischief and riots/civil commotion. This is also the coverage that’s going to protect you from building collapse, falling objects, damage due to the weight of snow, ice or sleet, water damage from bursting pipes (or other plumbing mishaps), and your hot water tank blowing up. Needless to say, this is a good policy to have!
c) HO-3. This is the “special” policy issued to protect your home from any peril except those specifically named as uninsurable and it’s among the most common types of homeowners insurance policies issued every year. If you’re buying an HO-3 policy, just make sure you know exactly what’s not covered. The last thing you want is a nasty little surprise waiting for you when you try to file a claim.
d) HO-4. This is the typical “renter’s insurance” policy that provides you with the same broad coverage found in the HO-2 policy for your personal belongings, as well as additional living expenses and liability.
e) HO-5. The HO-5 is the most comprehensive insurance policy available on the market, quite literally protecting your home against everything but earthquakes, war, nuclear exposure and flooding. In other words, take Mother Nature and the world’s mad scientists out of the equation and you’re good to go!
f) HO-6. This is your typical condominium insurance policy, and it’s used to insure items not covered by the association (whose coverage stops at the exterior walls of the building and doesn’t extend to the rat trapped in between) and personal items and take care of any liability issues that might pop up along the way.
g) HO-8. This is what’s known as an “older home” policy among the insurance community. What’s it for? Primarily to keep insurance companies from having to use expensive and/or inferior materials to replace or repair elements of an older home. The HO-8 policy brings older homes kicking and screaming into the 21st century.
Anthony M. Peck is the Senior Developer, Software Project Manager, and Director of Business Development for QuoteScout.com. For more information on buying homeowners insurance, please visit them on the web at http://www.QuoteScout.com
Filed under Home Insurance by on May 3rd, 2010. Comment.
There are many ways to lower your home insurance costs. Here are 4 little known and practiced secrets to find those extra discounts.
1. Ask for a Repeat Customer Discount
If you’ve kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. Do not assume this discount gets you the lowest rates and shop around at least once a year.
2. Review Your Policy Limits Each Year
You want your policy to cover any major purchases or additions to your home, but you don’t want to spend money for coverage you don’t need. If your computer is no longer worth what you paid for it, you’ll want to reduce or cancel your rider (extra insurance for items whose full value is not covered by standard homeowners policies such as expensive jewelry, high-end computers and valuable art work) and pocket the difference. Some items like jewelry might have gone up in value.
You will also want to check insurance levels on your house. Most likely the value of your home is not the same as it was last year. Generally it has gone up, but in some years it goes down. Lowering the coverage to your market value will also lower your premiums.
3. Look for Private Insurance
If you live in a high-risk area, one that is especially vulnerable to coastal storms, fires, or crime, and have been buying your homeowners insurance through a government plan, you should check with an insurance agent to see if you can get in a private plan. Market conditions change all of the time and insurers change their standards depending on the market.
4. Find Out How Much Insurance Will Be Before You Buy A House
You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it’s more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.
Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you’ll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority provides this coverage.
By getting rid of unnecessary and duplicative insurance coverage and knowing your costs going into a home purchase you can probably save several hundreds of dollars this year.
About the Author:
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Article Source: ArticlesBase.com – Save $500 By Reviewing Your Homeowners Insurance Policy
Filed under Home Insurance by on Dec 14th, 2009. Comment.