THE RECENT EARTHQUAKES that struck Barbados caused a fair amount of panic. Running outside is not advised and mayhem will only make things worse. Since it’s near impossible to tell when an earthquake will strike, it’s better to be safe than sorry.
That’s where preparedness comes to mind. The point of having insurance is to secure peace of mind that in the advent of the worst there will be aid in time of need.
Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. However, most ordinary homeowner’s insurance policies do not cover earthquake damage.
This was part of the reason the devastation to San Francisco in 1906 was so vast. Many homeowners had no policy in place in the event of the earth itself being a major threat to property. Many buildings were fractured and damaged beyond safety. Unfortunately, being foolhardy, many property owners saw fit to set blazes in order to claim on fire insurance.
Any reasonable person should know the folly of that idea. “We’ve suffered massive loss and are still in danger, let’s make it more dangerous in hopes of receiving better compensation.” Yes, that’s a brilliant plan; I hope you sense the sarcasm.
Most earthquake insurance policies feature a high deductible, which makes this type of insurance useful if the entire home is destroyed, but not useful if the home is merely damaged. Rates depend on location and the probability of an earthquake loss. Rates may be cheaper for homes made of wood, which withstand earthquakes better than homes made of brick.
It is important to go through risk assessment and your available options before making any decision. That’s good advice for all areas of life. Conversations with brokers and agents should be openly initiated to address concerns and how they can be faced.
As with flood insurance or insurance on damage from a hurricane or other large-scale disasters, insurance companies must be careful when assigning this type of insurance, because an earthquake strong enough to destroy one home will probably destroy dozens of homes in the same area.
If one company has written insurance policies on a large number of homes in a particular area, then a devastating earthquake will quickly drain all the company’s resources. Insurance companies devote much study and effort toward risk management to avoid such cases.
As with everything to do with insurance, risk is the key. That’s the whole point of insurance – to manage risk. Where is your property situated? What is the potential scale of damage if an earthquake struck? What after-effects of a quake are you vulnerable to?
It’s important to weigh risks and get advice from people who can accurately survey your property and assess what policies are best suited to your specific needs.
