Saving You Money For Life

A.M. Best, a New Jersey based insurance rating agency, few people have stepped up for earthquake insurance despite the catastrophic losses (similar to hurricanes) that quakes can cause. Best looked at the earthquakes that caused the greatest damage in the United States. The massive Northridge, Calif., earthquake of 1994, for example, resulted in nearly $18 billion in insured property losses in today’s dollars, the report said. The great San Francisco earthquake and fire of 1906 would generate more than $29 billion in insured losses today.

However according to Best, a mere ten to fifteen percent of American homeowners carry earthquake insurance. In California, a state legendary for its quakes, “only 12 percent of 2005 residential insurance packages and 11 percent of commercial insurance packages included earthquake coverage.”

As tens of thousands of Southeastern homeowners have learned, a typical homeowners’ policy covers wind and rain damage but excludes water damage caused by storm surge flooding. In like fashion, standard policies cover fire damage that results from an earthquake but special policy riders are needed to cover damage from the shaking.

Speculation from a Best spokesman centered on cost and probability. “Part probably has to do with cost. Sometimes there’s a high deductible, so people wonder if it’s worth taking it on. Or there could be caps on coverage, again making people think twice.”

The costs incurred by a major shake could be themselves catastrophic. The study found, for example, that a huge earthquake in the Los Angeles area could result in nearly $550 billion in property losses. By their estimate, about $101 billion would likely be reimbursed by insurance companies at current participation rates.

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