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Earthquake Insurance Covers Losses Not Protected by Home, Business Insurance

04/06/2010

The 7.2 magnitude earthquake that struck Baja California this weekend may drive home the importance of protecting against such disaters.

Losses incurred from an earthquake are not covered by standard business and homeowners insurance, according to a recent report by the Insurance Information Institute. Those living in California may be able to take advantage of policies offered through the California Earthquake Authority. Deductibles on such coverage are calculated as a percentage of the property's value, rather than a set dollar amount.

Homeowners who receive coverage through the CEA will have the option of a 10 to 15 percent deductible. However, other companies may offer deductibles ranging from 2 to 20 percent of the property's replacement cost.

"Earthquake insurance premium rates are determined differently by each insurance company and can vary widely depending on several factors, such as the location of the building and the construction materials used in its construction," the report said.

Those living in older buildings may suffer elevated losses from such disasters, because such structures were not built to meet current safety requirements. The most costly earthquake in history struck California on January 17, 1994, and led to some $44,000 insured economic losses and 60 fatalities.

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