Earthquakes are destructive and unpredictable. They can strike in areas that aren’t typically associated with seismic activity, causing property losses that can cripple your success as a real estate developer.
If you don’t already have a policy, be sure to learn about earthquake insurance policies and assess whether you are exposing yourself to unnecessary risk.
How Earthquake Policies Work
Earthquake policies are usually sold with deductibles that equal between 10% and 25% of a structure’s value. If you are buying a policy on a $400,000 building, for instance, your deductible would be in the range of $40,000-$100,000. Deductibles work about the same way they do on an automobile policy. You are responsible for paying the deductible amount after an earthquake damages your property, and then insurance will pay only for damages that exceed the deductible.
As you would expect, the more you pay out in policy premiums, the lower the deductible that applies.
Like Car Insurance, Only Different
Unlike automobile insurance, which has just one deductible, many earthquake insurance policies treat contents and structure separately. To make it more complicated, different deductibles may apply separately to distinct loss areas, such as:
- Damage to automobiles as a result of an earthquake
- The contents of a property
- Damage to external structures such as garages, sheds, driveways or retaining walls
- The loss of the entire structure
Because not all policies are alike, be sure to shop around to get the coverage that best meets your particular needs. Note too that insurance companies are now applying increasingly tough requirements when writing policies. Most require an inspection of your property before they will agree to issue a policy.
Another Earthquake Hazard to Consider
Fires that occur after earthquakes can cause just as much damage as the seismic event itself. So review potential policies to be sure that they will cover you if an earthquake causes a fire.
Should You Buy a Policy from A Company That is Not Your Primary Insurer?
You’ve probably gotten brochures in the mail from companies that sell stand-alone earthquake insurance policies. They are often not the same companies that are already insuring your properties. Should you buy a separate policy from one of them?
Those policies are called “stand-alone” because they are offered by specialty insurance companies that do not require you to purchase your primary homeowners insurance from them too.
Sometimes such policies represent good value because they are offered by companies that are specialists in earthquake insurance. Those companies are therefore able to offer you lower costs, and assume bigger risks, than more general insurance companies.
Before buying a policy from any company, check out its ratings on Insure.com. Also compare the policy’s coverage to what you can get by adding riders to general property insurance policies that you already have in place. You could find that it will be more economical to expand your current policies than to add a new one.
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