The Ins and Outs of Earthquake Insurance
There are many types of natural disasters that standard home insurance helps with, but earthquakes are not a normal event covered without adding the protection. This is due to the fact that severe earthquakes are not a common occurrence and damage is usually minimal. The likelihood of a big shake is really dependent on whether you live in an area that is prone to them. Areas like California and Washington are at higher risk to experience a serious earthquake long before any areas in the Midwest.
One of the major differences between earthquake coverage and standard home insurance is how you choose deductible amounts. Standard homeowner insurance policies offer a variety of deductible levels that are based on actual monetary amounts, such as $500 or $1,000. You may set the amount to be affordable in case an event occurs and you need to file a claim. Deductibles for earthquake policies are chosen as a percentage of the overall policy limit. If you have a home insured for $500,000 and you choose a deductible of 15% of the policy limit, it means you will be responsible for as much as $75,000. Rates differ heavily depending on location.
If your home and all possessions are lost in a fire or a tornado, for instance, they will be covered for replacement up to a certain amount of the structure limits. It is typically 50 to 70%. Earthquake coverage is a bit different and will only replace a small increment of possessions to a set amount, such as $4,000 or $5,000. This is because the likelihood of losing everything is slim. It is typically fragile items such as televisions and other breakables that are destroyed.