Does Your Insurance Cover Hurricanes and Earthquakes?

People up and down the East Coast are thinking about earthquake coverage, after a 5.8 earthquake rattled the Mid Atlantic states on August 23. Bill Howard, an independent insurance agent in Alexandria, Va., just across the Potomac River from Washington, D.C., has been getting calls for the past two days from clients who don't have much damage this time around but want to find out whether they're covered for any future quakes.

Homeowners insurance policies don't cover earthquakes, but you can generally buy a rider to add the coverage to your policy. And in areas that rarely experience major earthquakes, like most of the East Coast, the coverage is relatively inexpensive. Howard says that it would cost about $250 per year to add earthquake coverage in his area to a Chubb policy that has a maximum coverage limit of $500,000.Earthquake coverage generally has higher deductibles than standard homeowners coverage does -- you may have a regular deductible of $500 or $1,000 for other types of damage, for example, but have a deductible of 2% to 10% of your coverage limits for earthquake damage. If the deductible is 2% of $500,000, for instance, the earthquake coverage kicks in for amounts above $10,000 in damage.

Some policies have even higher deductibles in return for lower premiums. Safeco, for example, offers earthquake deductibles of 10% to 25%. A $500,000 policy on a wood-frame home would cost $115 per year with a 10% deductible, says Howard. And the annual premium shrinks to just $30 per year if you take a 25% deductible -- but the insurance coverage would kick in after you have $125,000 in earthquake damages. With events that are rare in your area, such as earthquakes, you may want a higher deductible in return for lower premiums. But you'll need to balance the premium savings with how much you could pay out of pocket for repairs.

Read the full story at Kiplinger.

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