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Understanding Earthquake Insurance

Earthquake insurance is a type of property coverage designed to pay for damages inflicted by seismic activity. Since most property insurance plans do not cover such damage, it is normally sold as a supplemental policy.

This type of insurance is obviously designed for those who live in regions most affected by earthquakes, but these areas are more encompassing than many believe. Rates will be based on the probability of seismic activity and the manner by which both the property and the land underneath it will react to an earthquake. Accordingly, rates may be lower for homes or buildings made of wood, which will absorb the damaging effects of an earthquake more effectively than brick structures. Earthquake policies are available to homeowners, renters, condominium dwellers and even to those who live in mobile homes. Earthquake coverage for businesses can often be purchased from commercial carriers that specialize in such plans.

Earthquake coverage is no different than other insurance plans in that it is not comprehensive. Homeowner plans will usually not cover damage to pools, fences or structures not attached to the primary dwelling. However, coverage will extend to many things within the home, including furniture and computers. It may also help pay for living expenses until the property is repaired. Coverage may not extend to damage from fires resulting from an earthquake. In these cases, coverage that is part of a regular insurance policy may pay for the fire damage. In California, fires caused by temblors are automatically included in any earthquake policy. An earthquake policy will not cover water damage that was related to the temblor, such as the breaking of a sewer line.

An earthquake policy will also have a deductible, which is the amount that will have to be paid by the property owner before coverage begins. The deductible is normally 10 to 15 percent of the total cost, although it may be higher. Such coverage can be particularly useful in cases where there is severe and costly damage to a property. Unfortunately, most property owners who live in earthquake areas have not taken advantage of such coverage. In fact, only one in nine property owners in seismically active California have earthquake insurance.

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