Do I Need It and How Does It Work
Your homeowners’ policy protects against losses such as fire, tornados and hail. Your policy only covers earthquake if requested. Coverage for earthquake is essential to carry in the St. Louis area. You need to understand what it covers and how much you will pay.
St. Louis is located on the New Madrid fault line, which starts near St. Louis and goes all the way to Memphis. It was named after the worst earthquake in US history occurred along this fault in 1812. The U.S. Geological Service cannot predict when another severe earthquake will affect this region but most experts agree that a severe earthquake will occur in the future.
If a hailstorm hits your house probably the roof and gutters will be affected. If an earthquake hits your house, your walls, foundation, valuable articles and contents will all most likely be affected.
When you select coverage under your homeowners, it protects against damage to your house, foundation and contents. This is subject to a deductible that is much higher than your normal deductible. Deductibles are different for each insurance company and the deductible applies to your limit of insurance not the damage done to your home. For example, if you have a $1,000,000 dwelling, $500,000 in contents and a 20% earthquake deductible, you may be responsible for the first $200,000 in dwelling damage and $100,000 in contents damage. Seeking an insurance company with the lowest deductible is suggested because a 10% deductible is common among some but not all insurance companies. Some insurance companies restrict how coverage will pay depending on terms and conditions.
If you have fine art or valuable articles scheduled on your policy, make sure earthquake is included and that breakage is included. If these are included, coverage is typically provided with a $0 deductible.
According to the Missouri Department of Insurance in 2009, although earthquake is a catastrophic event, only 36% of homes in St. Louis City and 63% of homes in St. Louis County had purchased earthquake coverage protection.
We recommend several things in order to understand your coverage and your potential out of pocket costs. One, contact your agent and ask to understand how your earthquake coverage works, what deductibles you have and how the policy will pay. Also ask what is not covered by the earthquake policy. Second, get a second opinion. A direct insurance company such as American Family or State Farm can only offer the products provided by their company. If they offer a 20% deductible that is all they can provide. An independent agent can go to multiple insurance companies and seek multiple options whether to reduce costs, reduce a deductible or possibly even to offer earthquake to a home that currently cannot purchase coverage.
We feel knowing if you have earthquake coverage, what that coverage protects and how your deductible will apply are essential items to know before a claim. Having a capable agent or working with a reputable insurance company will help alliviate concern with regard to this coverage.
Jason Cooksey is a private client broker at Daniel and Henry. firstname.lastname@example.org or 314-444-5017.