Know the Fine Print of Your Earthquake Insurance Policy

Mark StraussBusiness | Commercial Insurance, General Insurance Issues, Individual | Personal Insurance

Do you know the fine print of your earthquake insurance policy? If your like most consumers of insurance you’ve probably never laid eyes on and read your policy. The reason for this is we assume the insurance company will take care of us at the time of a loss not just because their marketing says so but because the formula is quite simple, in exchange for paying a premium for the earthquake insurance policy the insurance company then promises to pay for the loss that is caused by the peril of earthquake.

Unfortunately as a consumer our expectations of reimbursement most often differs from what is listed inside the complex legal language that is found inside your earthquake insurance policy.

Ask yourself these questions about your earthquake insurance policy:

 How does my policy define “replacement”? Will your structure be replaced with similar construction materials based on original materials or will it be replaced with construction techniques and materials commonly used in standard new construction?

The Loss Settlement Provision of your earthquake insurance policy will  provide details on how the insurance company defines replacement.

What if my structure is only slightly damaged after an earthquake but the land underneath it is unusable? Will your earthquake insurance policy provide you with an option to rebuild at a new location with the full replacement cost value limit available to you?

 Is the replacement cost value of your structure up-to-date? When was the last time you completed a replacement cost survey from your insurance company? The following factors go into consideration to determine the insurance replacement cost of your structure:

 Type of foundation;
 Type of frame;
 Roofing materials and type of roof;
 Siding materials and type of siding;
 Whether the structure is located on a slope;
 Building code upgrades
 Size of the entire structure and square footage;
 Geographic location of property;
 Number of stories and any nonstandard wall heights;
 Materials used in, and generic types of, interior features and finishes, such as, where applicable, the type of heating and air conditioning system, walls, flooring, ceiling;
 Age of the structure or the year that it was built

 How much business income, additional living expense and loss or rental income is included in your policy? Is your policy restricted to a time limit or a maximum financial payout?

How soon will earthquake damage be assessed if my structure suffers damage? Most earthquake insurance policies define an “occurrence” as a 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. What if there are smaller aftershocks but cause no damage and the insurance company assesses that damage occurred outside the first time limit of 72 hours. How do we protect ourselves from that?

How would your policy respond if there was an earthquake occurrence after the structure is repaired within one year? Would your policy limits reset after a pay out or would the limits reset after the current policy term expires?

Your consideration to buy an earthquake insurance policy for your structure is because you cannot afford to take the risk of losing the investment of your structure. It only makes sense if you go through the effort to secure the coverage that you put in some time to understand the specifics of the policy which you purchased.