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Insurance

What Disasters Does Your Homeowners Policy Cover?

Advice on the types of home insurance coverage you should sign up for to ensure your protected during an earthquake or hurricane.

I live in Washington, D.C., and my house shook during the earthquake on Tuesday. I didn’t have much damage, but now I’m wondering, do I have any coverage for earthquakes under my homeowners insurance policy? If not, how much would it cost to add it? And there’s a hurricane coming now, too! Do I have coverage for that? What a week.

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.

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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.

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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 to add earthquake coverage 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.

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The price can also vary a lot depending on the house’s building materials. Earthquake coverage that costs $115 for a wood-frame home would cost $325 per year for a brick house. And premiums vary by state. Prices are similar for Virginia, Maryland and D.C., says Howard. But they can be significantly higher in areas that are known for having more earthquakes. And if you live in high-risk areas of California, you’ll need to buy coverage from the California Earthquake Authority.

If you decide you want earthquake coverage, you’ll have a tough time getting it right now in any areas that were hit by the recent earthquake. Howard says that almost all of the insurers he works with won’t issue new earthquake coverage in the Virginia and Washington, D.C., area until five days after the last aftershock.

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Some companies have even stopped issuing new homeowners insurance policies in the area for a few days because home insurance covers some secondary damage that can be caused by earthquakes. If, for example, a gas line ruptures because of an earthquake and then causes a fire, you’d generally have coverage for the fire under your homeowners insurance, says Howard.

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In areas expected to be affected by Hurricane Irene, companies are also putting a hold on issuing new homeowners policies. Homeowners insurance covers wind damage and other losses from hurricanes -- except for flooding -- but many insurance companies temporarily stop issuing new coverage or cease raising coverage limits in areas where a hurricane watch or warning has been issued. Some expand the moratorium to areas within 100 miles of the affected coastline.

Homeowners insurance doesn’t cover losses from flooding, which can also cause a lot of damage during a hurricane. For that, you’ll need to get coverage from the federal government’s National Flood Insurance Program. You can find price quotes and flood-risk information at FloodSmart.gov, and you can generally buy a policy through your homeowners insurance agent. But there’s a 30-day waiting period before that coverage can take effect.

For more information about preparing for hurricanes and other disasters, see Protect Your Property and Finances Against Hurricanes.

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