Earthquake insurance

From ArticleWorld

Earthquake insurance is the policy cover that compensates for damage to a property and home repair and the replacement of personal property lost to seismic activity. The extent of the cover is limited by the terms of the policy but a standard policy provides cover for the building and its contents. This is a special policy and its existence may be attributed to the fact that earthquakes are not covered by standard homeowners or most business policies. In fact earthquake insurance is not recognized in Britain.

Policy in detail

The policy covers the damage to home and property, but includes a large percentage deductible on each. The rate of deduction depends upon the probability of earthquakes in the area. Another factor which determines the rate is the construction material of the house that has been insured. Wooden houses have less deductibles as they are better at withstanding earthquake shocks as compared to mortar and brick buildings.

Although the policy is known as earthquake insurance, it actually covers all damage that results due to any kind of earth movement. This very broad category also includes landslide, mudslide, mudflow, sinkhole or any other movement that involves the sinking, rising or shifting of earth.

The policy in California

In the American state of California earthquake insurance is a bone of contention between the homeowners and the insurance companies with the state government playing arbitrator. Since a single earthquake disaster and the resultant claims can wipe insurance companies out of existence, they are very reluctant to cover this contingency. The government has made it mandatory for all home owners’ policies to cover earthquake also but has allowed the companies to cover only structural damage.

In Japan earthquakes are a major menace causing insurance companies and the Japanese government to spend upwards of 1 trillion yens. This huge expenditure is borne by the government and the insurance companies under a scheme created by the Japanese government in 1966 called the Japanese Earthquake Reinsurance.