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Insurance Regulator Encourages Earthquake Insurance

Regulator Encourages Earthquake Insurance Following Great Central U.S. “Shakeout” Exercise

  

Jefferson City, Mo. – The Great Central U.S. “Shakeout” exercise has passed, but it doesn’t mean Missourians should stop thinking about earthquake preparation. The Missouri Department of Insurance is encouraging policyholders to follow up with their insurance agents to see if their property is covered by earthquake insurance. Most policies do not include this coverage, which must be purchased separately.

“The Shakeout exercise is a great reminder for homeowners to review their policies for earthquake coverage,” said John M. Huff, director of the department. “Consumers who aren’t covered are encouraged to buy this extra protection for their homes, businesses and belongings.”

Missouri is home to the New Madrid Seismic Zone, centered in southeast Missouri and the nation’s most active earthquake zone east of the Rocky Mountains. At least three of the largest earthquakes recorded in the continental United States are believed to have occurred in that area from 1811 to 1812 – the largest occurred on Feb. 7, 1812.

Earthquake insurance market contracting, but coverage still affordable

“The availability of earthquake coverage is a growing challenge in our state,” Huff said. “We continue to work with the industry to advance private sector improvements to the market for earthquake insurance. Unfortunately, the number of companies offering coverage is declining. We know deductibles are rising substantially and there is a decline in both coverage options and availability in some areas, particularly southeast Missouri.”

Craig’s Jones Notes:  While there are fewer companies offering earthquake insurance in Missouri we still have a number of earthquake options available through many of our insurance companies for Missouri and the rest of the States we do business in.  Call your Yennie & Jones agent to ask about earthquake protection options.

Consider Earthquake Loss Control Measures

Earthquake Loss Control Measures:  States in which hydraulic fracking is occurring have seen a dramatic rise in earthquake incidents, raising concerns that this drilling method could be to blame. For example, there is a tremendous amount of fracking activity in Oklahoma. The Sooner State has experienced almost 250 small-to-medium earthquakes so far this year, according to the US Geological Survey.

For people in earthquake-prone areas, earthquake insurance is a smart option. But another area of focus should be in loss control. Here are some risk control tips (authored by the City of Los Angeles Department of Building and Safety) for you to pass on to your clients facing this loss exposure.

  • The foundation, a common area of structural weakness, needs to be thoroughly examined for weaknesses. When concrete foundations are crumbly or porous, they lack the strength to resist earthquakes. Unreinforced brick or stone masonry may need to be strengthened or replaced. An engineer is required by most communities to design these types of repairs. Signs of insect damage and dry rot in the wood need to be checked. Hiring a structural pest control expert and repairing water leaks may be necessary.
  • Older homes in earthquake-prone areas may not be bolted to their foundations. Anchor bolts can be installed by capable home owners relatively inexpensively with the proper knowledge and tools. Otherwise, a foundation contractor should perform this task.
  • Bracing materials within the foundation should also be inspected. Weak bracing materials (e.g., cement plaster or wood siding) may have been used in the construction process. Stronger bracing materials such as plywood are necessary to support the cripple wall. (The cripple wall is the short wall that connects the foundation to the first floor of the house and encloses the crawl space.)
  • For homes built on a slope or even a slight grade, extra strengthening may be necessary.

Experts indicate that retrofitting most single-family homes costs between $3,500 and $7,000. Home owners who perform some of this work themselves pay less.

Studies show that properly strengthened homes are safer to live in and easier to sell. A study of the aftermath of the Northridge earthquake of 1994, which caused between $13 billion and $20 billion in property damage, indicated that strengthened homes stayed on their foundations in the same neighborhoods where unstrengthened homes failed to do so.

Get more personal lines insurance and risk management tips and ideas from IRMI.

Copyright 2014 International Risk Management Institute, Inc.

Homeowner’s Insurance Policies Do Not Include Earthquake

Missouri Department of Insurance encourages consumers to consider buying earthquake insurance because most homeowners policies do not include earthquake coverage.

Jefferson City, Mo. – The Missouri Department of Insurance is encouraging Missourians to check with their insurance agents to see if their property is covered by earthquake insurance. Most homeowners policies do not include this coverage, which must be purchased separately.

“At a minimum, consumers need to know if their policies include earthquake coverage,” said John M. Huff, director of the Missouri Department of Insurance. “Now is the time to check. Consumers who aren’t covered are encouraged to buy this extra protection for their homes, businesses and belongings. ”

Missouri is home to the New Madrid Seismic Zone, centered in southeast Missouri and the nation’s most active earthquake zone east of the Rocky Mountains. At least three of the largest earthquakes ever recorded in the continental United States are believed to have occurred in that area from 1811 to 1812 – the largest occurred on Feb. 7, 1812.

The cost of earthquake coverage has continued to rise, however the cost is still affordable. According to 2012 statistics, if an earthquake strikes along the New Madrid Fault, nearby Mississippi, New Madrid and Pemiscot counties would be hardest hit. However, only 19 percent of homes in Pemiscot County had earthquake coverage, 26 percent in New Madrid County and 27.5 percent in Mississippi County.

About the Missouri Department of Insurance, Financial Institutions & Professional Registration

The Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) is responsible for consumer protection through the regulation of financial industries and professionals. The department’s seven divisions work to enforce state regulations both efficiently and effectively while encouraging a competitive environment for industries and professions to ensure consumers have access to quality products.

Earthqake Coverage for Homeowners

The following information on earthquake coverage for homeowners was provided courtesy of the State of Missouri’s Department of Insurance Website:

About earthquake insurance

Separate purchase

While consumers may think California when thinking about earthquakes, Missouri has been tabbed as an area that could experience large-scale earthquakes. Californians indeed buy the most earthquake insurance, but Missouri ranks third among all states in total premium volume at more than $84 million. Earthquake coverage is not included on most homeowners insurance policies. It must be purchased as separate coverage, called an “endorsement.” This type of insurance requires that the earthquake is the direct cause of damage to the property. Natural disasters can, in many instances, trigger other events that may also damage property. One example is earthquakes causing bodies of water to produce waves, resulting in flooding.

Crystal’s Note:  Earthquake can be purchased by endorsement but also as a stand-alone policy if your insurance company doesn’t offer earthquake protection…as more and more are…or aren’t as the case may be.

What is covered

Earthquake coverage pays for damage caused by the shaking and cracking that can harm homes. Other damage may be covered by other insurance. Fire and water damage due to burst gas and water pipes – even though it may be caused by a quake – is generally covered by the standard portion of the homeowners policy. Earthquake damage to vehicles is covered by the comprehensive portion of auto policies.

Pricing and availability

Earthquake insurance usually features two high deductibles: rather than a dollar amount, it’s a percentage of the cost of rebuilding the home and a separate deductible for the home’s contents. Ddeductibles of 10-15 percent are common. Premiums are higher in southeast Missouri and St. Louis than other parts of the state. With these percentages, the owner of a $200,000 home could expect to pay up to $45,000 in deductibles before receiving any benefit from their earthquake insurance policy.

The material used to build the home can also determine premiums or whether your home is even insurable. For instance, rates may be cheaper for wood-frame homes, which withstand tremors better than homes made of masonry such as brick and stone. Single-story homes may also receive better rates as they tend to sustain less damage from an earthquake. Age of the home can also affect premiums. Some insurers will not offer earthquake insurance for masonry homes.

Crystal’s Note:  Earthquake protection is also available for commercial and investment properties.

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