Earthquake damage not covered by standard homeowner’s policies
Following the East Coast earthquake on Aug. 23, 2011, insurance experts are reminding consumers that standard homeowner’s and commercial property insurance policies do not cover earthquake damage.
Christopher Brassard, chairman of the Independent Insurance Agents & Brokers of New York, says in a news release: “Many insurance companies offer the coverage for an additional premium. We encourage all homeowners, renters and business owners to consult with their insurance agents about whether they should buy earthquake insurance.”
Insurance companies ordinarily offer earthquake coverage with a deductible equal to a percentage of the replacement cost of a structure. For example, a homeowner buys a policy with a 5 percent deductible on a home that would cost $200,000 to rebuild. The homeowner would pay the first $10,000 of an earthquake loss before the insurance company would pay a claim.
Glenn Pomeroy, CEO of the California Earthquake Authority, capitalized on the East Coast earthquake to press for passage of the Earthquake Insurance Affordability Act, which is pending in Congress. The legislation would provide limited federal backing for private debt held by a publicly managed earthquake insurer. The California Earthquake Authority is the country’s largest publicly managed earthquake insurer.
In a news release, Pomeroy says the federal legislation would make earthquake insurance more affordable for Americans. Because of the high cost, only 10 percent of homeowners in California — the state with the highest quake risk — have earthquake insurance.
“It’s a fact that all federal taxpayers are seriously exposed to the massive costs of earthquake damage. Because too few households can afford earthquake coverage, we know that when individuals can’t afford to rebuild, the federal government is asked to help,” Pomeroy says. “Making earthquake insurance more affordable helps families rebuild and their communities recover, but it also reduces federal taxpayers’ financial risk.”
About 5,000 quakes strike the United States each year, according to the Insurance Information Institute. The Northridge earthquake, which struck Southern California in January 1994, was the costliest quake in U.S. history, causing an estimated $20 billion in property damage.