your financial world can be shaken by an earthquake

By Ron Lent

You could face financial ruin if an earthquake destroys your home and you have no insurance policy to cover rebuilding costs. The typical homeowners insurance policy doesn't provide earthquake protection.

Granted, catastrophic earthquake coverage isn't cheap and policies come with high deductibles (maybe up to 15 percent), but ask yourself: Without earthquake insurance, do I have enough money to cover costs of repairing quake-damaged property?

If your answer is "no," then consider the opinion of John Anderson, professor of seismology and director of the Nevada Seismological Laboratory. "I've visited a number of earthquake zones, and have seen firsthand how many people have lost far more than they can afford to lose. Earthquake insurance protects you from that," Anderson told Insure.com by telephone.

Anderson singled out two of the more important points to consider when considering earthquake insurance:

1) You cannot expect financial help from governmental agencies if you sustain an earthquake-related loss; and 2) Single-family wood frame homes that were built recently stood up "reasonably well" in recent serious U.S. earthquakes, Anderson stated.

A cautionary word from Anderson: "Damage to contents is likely to be greater than structural damage to your house," Anderson warned.

San Francisco-based insurance executive Pete Gorman points to earthquake insurance issues that homeowners should consider. "First, they should research what the potential exposure is to the catastrophe."

Gorman said consumers need to find answers to important quake-related questions. For example, "are they in a known fault line? When was the last "big" (earthquake)? Ten years ago? A hundred years ago?" asked Gorman, vice president and regional manager for the Illinois-headquartered Alliance of American Insurers.

The California Earthquake Authority (CEA) is the nation's first and only privately-financed, publicly-run earthquake insurance pool. The CEA came into being not long after the January, 1994 Northridge earthquake rocked Southern California and caused more than $16 billion in insured losses.

CEA spokesman Stan Devereux talks about why homeowners might need earthquake insurance. "California is prone to earthquakes. Various government agencies report that on a typical day, 20 earthquakes strike California, although most of these temblors are not even felt. Consequently, all homeowners in this state who are concerned about rebuilding their homes in the event of a catastrophic quake should consider buying this specialty coverage to protect what is likely their single biggest investment in their lifetime," says Devereux, CEA public and government affairs director, in Sacramento.

The CEA requires a prospective customer to purchase homeowners insurance from one of the pool's member companies, and the facility provides coverage only to Californians. However, Golden State residents are not the only ones who should consider buying quake coverage, insists Devereux.

Adds Devereux: "Many people live near faults in other states and don't even know it, because a number of these faults have displayed little activity or have yet to be detected. Geologists are often surprised to learn the existence of a suddenly active fault."

You should consider buying an earthquake insurance policy that would cover the cost to repair or replace damaged property. In advance of purchase, find out if a policy only protects the structure or whether there's protection afforded for other structures such as detached garages. Also check to see if the policy provides contents coverage and additional living expenses if your house is destroyed or is badly damaged. Be sure to learn about policy exclusions or limitations of coverage.