Recent earthquake claim denials in Oklahoma and the 60 minutes segment about FEMA’s denial of flood insurance claims titled “The Storm After the Storm” highlights what might be that brutal aftereffect that awaits the status of earthquake insurance claims from the predicted Cascadia Subduction Zone rupture. Per the 60 Minutes report “the biggest ticket item inside a claim, for a flood claim, is the structural damage. And so when they don’t pay for structural damage, they save hundreds of thousands of dollars on each claim.” Based on this statement do you know how to make certain your earthquake insurance claim will be correctly adjusted?
Protect Your Earthquake Insurance Claim Before It Gets Filed
Be proactive and have a structural engineering report of your foundation on file with your insurance agent. This is the best way to provide an insurance adjuster concrete evidence as to whether or not your foundation has had pre-existing damage prior to an earthquake. It’s also a good idea to consider having a signed and notarized statement on file with your insurance agent as well that states the same.
Read the Insuring Agreement of Your Earthquake Insurance Policy
Do you know definition for earthquake under your earthquake insurance contract? Some companies will define earthquake as “means shaking or trembling of the earth, whether caused by volcanic activity, tectonic processes or any other cause. One or more earthquake shocks that occur within a seventy-two hour period shall constitute a single earthquake.” Some companies might use 168 hours to define a single event.
This is important to know because aftershocks can and most likely will occur after the main seismic event. The tremors can possibly be as strong as the main event, but they usually diminish in strength. Based on data in the Oregon Resilience Plan it might takes days, week, or even months before bridges and roads can be restored which will make it incredibly difficult for claim adjusters to document your loss. How can you successfully document the damage to your structure based on when the seismic occurrence actually occurred?
Know How Your Earthquake Insurance Deductible Works?
Earthquake deductibles work differently than traditional property insurance policies, the deductible works as a percentage rather than a dollar amount. Rebuilding your structure and replacing your personal property after an earthquake you are responsible for percentage of the structure’s replacement cost and personal property limit.
Earthquake deductibles range anywhere from 5% to 25%. It’s important that you only consider a higher earthquake deductible if your financial situation supports the ability to pay out on a larger claim. Would you be able to rebuild your home with a 25% deductible?
One thing that is needed to understand is the deductible provision is not a percentage of the loss, but rather a percentage of the replacement cost of the structure or personal property. For example if you carry a 10% earthquake deductible a loss would be adjusted as follows:
- Structure replacement cost is $500,000 | $500,000 (amount of insurance) X 10% = $50,000 earthquake deductible for structure.
- Personal property replacement cost is $250,000 | $250,000 (amount of insurance) X 10% = $25,000 earthquake deductible for personal property.
As a result of the earthquake if you suffer damage from another cause to your structure such as fire or water your earthquake insurance deductible is the only deductible that would be used.
How Do Earthquake Insurance Claims Get Settled?
After an earthquake you would get an estimate for the repair work that needs to be done. If the cost of repairs is more than your deductible you would then submit your earthquake insurance claim to the insurance company.
What I learned from the 60 Minutes segment is how much trust can you place with your insurance company and the experts that they hire to adjust earthquake insurance claims? A healthy dose of skepticism goes a long way to make certain you don’t get taken advantage of.
The insurance company would review the repair estimate, once approved they would then cut a check to the contractor less the amount of your deductible. You would be responsible for paying the outstanding balance with the contractor.
Having a full understanding of the earthquake insurance claim process is important to the success of the settlement of your claim.