Earthquake insurance has gained in importance in recent times, as parts of the world has been decimated by natural disasters. Increasingly, home owners and landlords in the UK, too as in other parts of the world are looking at insuring their home against earthquakes.
It is also one of types of insurances most ignored among homeowners. It is however, highly prevalent because it is a must for offices and other commercial properties which certain features such as laid brick or if it is above 10 floors.
Some years ago, in April 2007 to be exact, an earthquake measuring 4.3 on the Richter scale hit Folkestone in Kent. Though the earthquakes depth was shallow, its proximity to Folkestone caused a lot of damage to buildings in this coastal town. The Association of British Insurers estimated that the insurance claims from this earthquake to be around GBP 30 million. Strangely enough, only 40% of the properties which were damaged were insured!
There are some points to consider when you are out shopping for earthquake insurance. The earthquake insurance policy must cover the cost of replacing or repair to your property which has been damaged. Here is your checklist.
- Check whether the policy covers only your houses. What about the garage, the stables or the outhouses, are they covered too?
- Does the policy include what the house contains and is there provision for living expenses if the house is too badly damaged
- Read the fine print- what are the limitations or exclusions
- What must you pay before the insurance pays up?
It would be good to remember these factors also. The earthquake insurance rates are based on many aspects. Older buildings are, of course, more expensive to insure but wooden houses get a better rates then the brick ones as wood withstands earthquake stress better. The premiums would also depend on the proximity of your house to fault lines and the quality of the soil.
Earthquake insurance carries a huge deductible which ranges from 2 to 20%. For example, if the rebuilding cost of your home is about GBP100,000 and the policy has a 2 % deductible, you will have to cough up the fist GBP 2000.
Areas are generally graded on a scale of one to five for their chances of being hit by earthquakes; this would also have an effect on the rates. Most insurance companies would find that a rating of five is a deterrent to even think of a policy, while a rating of four might allow short term earthquake insurance policy contracts, that too with high premiums and almost no return.
If you get a rating of two, it will get a workable policy which is quite easy on the budget. But if you are located in an area which is rated as one or is below the scale- areas where earthquakes whose magnitude is not greater than of 2.5 on the Richter scale is not likely to happen- you dont have to really worry about the earthquake insurance. It is better you go in for a package such as a general home insurance along with earthquake insurance.