ANSWERS TO YOUR QUESTIONS ABOUT EARTHQUAKE INSURANCE
Your decision to carry Oregon earthquake insurance involves the consideration of many factors. Below are answers to questions that most people ask about carrying earthquake insurance for their Oregon home.
- Why should I buy earthquake insurance?
- What does earthquake insurance cover?
- How do insurance companies define “earthquake”?
- How much earthquake insurance coverage should I buy?
- How much does earthquake insurance cost and does it cost more if I own a masonry/brick home other than an a frame home for earthquake insurance?
- Do most policies have guaranteed replacement cost coverage? If so, how would this coverage apply if I suffer a loss?
- I own a condominium. How would earthquake insurance benefit me?
- I'm a renter. How would earthquake insurance benefit me?
- Would my car be covered by earthquake insurance?
- Is the deductible for my earthquake insurance coverage different from the deductible for my basic homeowners’ insurance coverage?
- What earthquake insurance deductible options are available?
- Will a separate insurance deductible apply to the structure, contents, and detached structures, or does one deductible apply to the entire loss?
- If I have to vacate my home, will earthquake insurance cover the hotel expenses? If so, for how long?
- Does earthquake coverage exclude certain property and is breakage of fragile articles covered if I purchase earthquake insurance? Is there a better way to cover these items (i.e. specifically scheduling)? If so, explain how this works to my benefit.
1. Why should I buy earthquake insurance?
The peril of earthquake is excluded in a standard Oregon home owner and renters insurance policy and must be purchased as a separate policy in order to receive reimbursement due to a loss by earthquake. Coverage provided by Oregon earthquake insurance policies include coverage for earthquake related losses and does not provide coverage for losses attributable to other perils that may be covered under your home owner policy.
*Please note that earthquake insurance does not cover a loss caused by landslides or erosion. Coverage for landslides are available through Catastrophe policies. Call Mark Strauss at 503-296-0077 for a quote that would cover a loss by catastrophe.
2. What does earthquake insurance cover?
Your Oregon earthquake insurance will cover the following: rebuilding your home and other structures, replacing your personal property, and providing additional living expenses after a loss due to earthquake.
3. How do insurance companies define “earthquake”?
Each company has its own definition of earthquake. You can find out how a company defines what an earthquake is by reviewing the policy language under the ‘Definition’ portion of any insurance contract. Most 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.” – This definition was taken from a Safeco Earthquake Insurance Policy.
An “occurrence” means loss to covered property due to earthquake shocks that occur within a continuous 72 hour period. This would include land shock waves or tremors before, during, or after a volcanic eruption as well. After this 72 hour period another seismic event would constitute the use of another earthquake deductible.
4. How much earthquake insurance coverage should I buy?
Due to the catastrophic nature of earthquakes, market conditions following an earthquake are dramatically impacted. Repairing or replacing you home damaged by an earthquake will typically cost more than a home that is damaged by a fire, water leak or other relatively small-scale disaster. The reason for this is that the because everyone in your area will have a loss at the same time this will affect the availability of building supplies, labor, food, hotels, telephones and the like. Due to this rebuilding costs and additional living expenses will cost more than what you expect. It is suggested that you have a personal insurance review every 2 years to make certain the insurance replacement cost of your home is kept in check.
5. How much does earthquake insurance cost and does it cost more if I own a masonry/brick home other than an a frame home for earthquake insurance?
Premiums for earthquake insurance differ widely by the type of house, its age, the nature of the soil, and proximity to known fault lines. Older buildings will cost more to insure than new ones. Wood frame homes generally benefit from lower rates than brick buildings because they have the ability to flex as a home made of masonry will shatter and cannot handle the stress as well as wood structures. Therefore a home made of wood most likely will experience a lower premium.
6. Do most policies have guaranteed replacement cost coverage? If so, how would this coverage apply if I suffer a loss?
You need to consult the language of your insurance contract to see if your current policy provides Guaranteed Replacement cost coverage. There are a few ways an insurance contract can rebuild your home after a loss two types of insurance policies that I offer for the replacement of your dwelling include:
- Guaranteed Replacement Cost - With this type of insurance coverage, once you’ve met your deductible, the insurer promises to pick up the cost for rebuilding your home regardless of what the cost is to rebuild the home. If your home is insured for $200,000 and it ends up costing $375,000 the company will rebuild it without carrying any of that cost over to the insured.
- Extended Replacement Cost Coverage - This is designed to cover rebuilding your home based on the declared value on your policy with an additional 25% – 50% cushion to protect you if there is an increase in labor and building materials. If your home is insured for $200,000 and has a 50% Extended Replacement Cost you have an additional buffer which brings your home replacement cost up to $300,000.
Most companies have eliminated Guaranteed Replacement Cost coverage and only offer Extended Replacement Cost coverage; among the companies I represent which provide Guaranteed Replacement Cost are Chubb and Fireman’s Fund Insurance.
7. I own a condominium. How would earthquake insurance benefit me?
All condominium association master insurance policies are written differently in regard to coverage's, deductibles and how much, if any, of the interior of your unit is covered by the associations master policy. If your association carries a separate earthquake insurance policy and the policy is an "All In" policy, this means that the interior walls, built-ins and any betterments or improvements are made to the unit are covered by the master policy. You would want to have your own individual earthquake policy because the master policy will not provide you coverage for your personal property and any extra expenses associated with a loss caused by an earthquake. (Review question 13)
8. I'm a renter. How would earthquake insurance benefit me?
The peril of earthquake is excluded in a standard Oregon renter insurance policy and must be purchased as a separate policy in order to receive reimbursement due to a loss by earthquake. Coverage provided by an Oregon earthquake insurance policy will provide coverage for your personal property and any extra expenses associated with a loss caused by an earthquake. (Review question 13)
9. Would my car be covered by earthquake insurance?
Cars are not covered under home owner or earthquake insurance policies. Cars and other vehicles are covered for earthquake damage under the comprehensive part of the auto insurance policy.
On top of providing coverage for loss due to earthquake the comprehensive portion of an auto policy will also provides coverage for losses that would include the following: loss caused by missiles or falling objects; fire; theft or larceny; explosion; windstorm, hail, water, or flood; malicious mischief or vandalism; riot or civil commotion; contact with bird or animal; or breakage of glass.
10. Is the deductible for my earthquake insurance coverage different from the deductible for my basic homeowners’ insurance coverage?
Your Oregon earthquake insurance deductible works as a stated percentage which is anywhere from 10% - 25% this contrasts to a standard home insurance policy which generally has a dollar amount such as $500 or $1,00 for claims such as fire and theft.
An example of an earthquake deductible would be if your home is insured for $200,000 and your earthquake insurance policy has a 10 percent deductible, you would have to pay the first $20,000 in repair or replacement costs before the insurance company will pay for the remainder of the repairs that are necessary.
11. What earthquake insurance deductible options are available?
Review the earthquake coverage companion chart which lists the earthquake deductible options available. Most companies offer deductibles ranging from 10% to 25%. Please contact each company directly to find out if their company specific earthquake deductible options have changed.
(The chart is updated as of March 2008).
12. Will a separate insurance deductible apply to the structure, contents, and detached structures, or does one deductible apply to the entire loss?
Most insurance companies split earthquake policy deductibles into separate categories – the dwelling, other structures, and personal contents. If any of the companies provide reimbursement like this then you will have to pay the deductible for each category.
I do work with a company that provides protection for the dwelling, other structures, personal property, and up to twelve months of loss of use as a combined single limit of coverage. As a combined single limit policy at time of claim settlement coverage may be applied as needed to dwelling, contents, loss of use, etc.
An example would be if the policy had a replacement cost of $297,000 (includes dwelling, other structures, personal property, & loss of use) with a 10% deductible the responsibility of the homeowner would be $29,700. The homeowner can choose how much of the $297,000 goes towards rebuilding the home versus how much is used for other structures, personal property and loss of use.
13. If I have to vacate my home, will earthquake insurance cover the hotel expenses? If so, for how long?
The part of an earthquake insurance policy that covers hotel expenses is called Loss of Use. This covers Additional Living Expenses and will pay for housing and other living expenses (meals & laundry) if a major loss makes your house that is uninhabitable and you have to move out while it's being repaired.
14. Does earthquake coverage exclude certain property and is breakage of fragile articles covered if I purchase earthquake insurance? Is there a better way to cover these items (i.e. specifically scheduling or policy endorsements)? If so, explain how this works to my benefit.
All policies contain what is called “Special limit of Liability”. This means that each company has a maximum they will pay for damage to covered property identified in the special limit of liability category. Examples of this might include:
- Maximum of $5,000 for chimneys or fireplaces
- Maximum of $3,000 for swimming pools, spas, whirlpool baths and hot tubs, including all concrete or tile decking and all related equipment
- Maximum of $3,000 for paintings, etchings, pictures, tapestries, antique furniture, valuable rugs, rare books and other similar articles of rarity, historic value or artistic merit.
- Maximum of $5,000 for business personal property
If you have property that is ‘scheduled’ or added onto the policy as an ‘endorsement’ or ‘personal articles rider’ there are no limitations and the schedule will cover any type of loss other than wear and tear.
