Preparing for disaster: earthquake insurance for your home or business

The images of devastating earthquakes in New Zealand and Japan in 2011 have shocked people worldwide.  Closer to home, many British Columbians have paused to consider the potential damage an earthquake could cause in the region.  And with good reason.

According to the Geological Survey of Canada, there is approximately a 10% chance that a massive earthquake will occur off the coast of BC or in Vancouver in the next 50 years. This type of earthquake could easily cause billions of dollars of damage to buildings and infrastructure.

Why should I have earthquake insurance?

At Habitat Insurance, we believe that the main objective of insurance is to protect you from a devastating loss.  Ask yourself the question: “Could I easily recover – without financial assistance – if my home or business were destroyed by an earthquake?” If the answer is no, you should seriously consider buying earthquake insurance.

Facts about earthquake insurance in BC

Earthquake insurance provides coverage for loss of or damage to personal property and buildings. It is optional coverage in all property insurance policies.  If you aren’t sure whether you have earthquake coverage or not, you should check with your insurance broker.

Earthquake premium rates are on the rise:  during the last 12 months, we have noted that many insurance companies have increased their premium rates and, with large losses such as those in New Zealand and Japan, this is a trend likely to continue.

Insurance deductibles are always higher for losses due to earthquake.  Your house insurance or business policy may state $500 to $2,500 deductible for specific perils such as water damage.  Earthquake deductibles are typically stated as a percentage of the total loss.  For example, if you have a earthquake coverage with a 5% deductible on your $1,000,000 home and $200,000 earthquake damage is caused to the dwelling, you will be responsible to pay the first $50,000 of the claim.

A special note for condo owners about earthquake insurance

A condo owner policy provides coverage for your personal property, not the building.  (The building should have its own separate strata policy with earthquake coverage.)  You may also choose to add earthquake coverage to your condo policy.  We highly recommend that you do this, as your policy can provide up to about $25,000 for a building’s earthquake deductibles coverage.

To illustrate the point more clearly, imagine this scenario:  your building is damaged/destroyed by an earthquake.  The condo owners will be responsible for paying the building earthquake insurance deductible.  A large strata building can be easily valued at $20,000,000; a total loss with a 10% deductible would result in a $2,000,000 earthquake deductible to pay.  If there is not enough money in the strata’s reserve fund, the remainder of the deductible to be paid will be divided between all of the condo owners.  If you have a condo owner’s policy with earthquake coverage, your insurance company will pay your portion of the deductible, up to the indicated policy limit.  If you don’t have earthquake coverage, your policy will likely pay no part of the earthquake deductible.

Condo policy limits can vary substantially for insurance deductible coverage.  Check with your broker about this important point.

How to pay less for earthquake coverage

Here are a few ways to reduce your earthquake insurance premiums:

Location: Premium rates for earthquake insurance in the Lower Mainland are highest for areas such as Richmond, Delta, and parts of New Westminster, which would likely be most devastated by an earthquake.  You will pay lower rates elsewhere.

Deductible: Ask for a higher earthquake deductible on your insurance policy.  For example, the standard earthquake deductible on your business or house insurance policy may be 5%.  You could opt instead for a 10% deductible.  Keep in mind that your deductible payment will also be much higher in the event of an earthquake claim.

Consider a lower personal property limit: If you are home owner, some insurance companies will insure the full replacement cost of the building and offer different personal property limits.  Ask your insurance broker if these options are available.

If you have any questions about earthquake insurance for your home or business in British Columbia, or you would like a quote, please contact us:

Habitat Insurance Agencies Ltd

Tel 604-438-5241

info@habitatinsurance.com

Copyright 2011 © Habitat Insurance Agencies Ltd.   All rights reserved.

Disclaimer:  This article is designed to provide information for personal use only.  Please consult your professional insurance broker for further information. Habitat Insurance Agencies Ltd is not responsible for any legal disputes of this matter.