SALT LAKE CITY – Last month, Matt Gephardt of KSL TV investigated whether earthquake insurance is worth the investment for homeowners in Utah.
His question turned out to be premonitory.
After Wednesday’s 5.7 earthquake in Magna, which shocked Utah’s largest urban center, many homeowners will consider again: is earthquake insurance right for me?
Earthquake insurance, which is not part of standard homeowners’ policies, even in areas prone to earthquakes, may seem like a big investment for a low probability event. Deductibles are often higher than average policies because the risk is not spread among the population, but rather concentrated in specific areas. They typically range from 5% to 20%, according to the Utah insurance department, which can leave homeowners hooked for thousands even with insurance.
But go through a catastrophic earthquake without it and you may find insurance that offers no assistance.
“Utah is on the Wasatch Fault, which is an area at risk,” said Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “So this is a wake-up call that Utah residents should at least consider purchasing separate seismic insurance, or make their policy available when available.”
Utah Insurance Department Commissioner Todd E. Kiser said that seismic insurance is becoming cheaper, especially for some homes.
“If your house is a structure, earthquake insurance is quite reasonable. It’s not very expensive,” said Kiser. “… it takes much longer to break down a wooden building than a brick building.”
It is important, Kiser said, to ask questions when purchasing seismic insurance: not only how the construction of the house will affect the premium, but also what each policy specifically covers. For example, he said, many seismic policies do not cover floods or landslides, even when that landslide follows an earthquake.
“If you live on a hill and are worried that the earthquake might shake the ground and make it unstable … and then you are worried about the collapse of the hill, that product is also available.”
He warned that Utahns buys and compares coverage between different companies and agents. “I would advise them to talk to several agents and ask those difficult questions,” said Kiser.
He also reminded residents to catalog their belongings so that they can demonstrate to insurance companies what they have lost in the event of a natural disaster.
Fabio Faschi, property and casualty manager, Policygenius manager, said that earthquake insurance could be “more difficult to evaluate” in Utah than, for example, in California, where earthquakes are more frequent.
“It will always be difficult for you to see the value of insurance until, unfortunately, a claim occurs,” said Faschi. “And that’s just the nature of the beast, right? Nobody wants to pay for their insurance until you have to use it. And an important thing in terms of evaluation is figuring out what will cover you.”
He said most seismic insurances will help not only with home repairs, but with replacing personal belongings and temporary life arrangements. The key, he said, is that customers “understand what they are getting” and evaluate the risk accordingly.
“I can never look at the price of an anti-seismic insurance policy and say” Oh, it’s too expensive, “said Faschi.
At Insurance Information Institute, spokeswoman Janet Ruiz said that earthquake insurance may be “a big investment”, but that “it may not be as expensive as you think”.
“So my encouragement is always to find out,” said Ruiz. “Maybe it’s completely convenient, and it’s a good thing.”
He said Utahns should not only consider insurance, but also think about adjusting older houses against earthquakes, which in turn could lower insurance premiums. “My encouragement is always to think about insuring your home financially because it’s often your biggest asset,” he said. “And it’s worth every penny, if you have damage after an earthquake, to be able to rebuild it.”
It is worth noting that the policies of standard homeowners may not cover an earthquake, but will usually cover a fire that may break out after one. In addition, insurers consider the initial earthquake and subsequent three days of aftershocks as a single event (which is why Utahns cannot purchase a policy at this time while the event continues); subsequent shocks require a second complaint, with another deductible.
However, Walker said he hopes other Utahns will consider seismic insurance in the days and weeks ahead.
“While it may not happen today or tomorrow,” Walker said, “we all want to think that the unthinkable will never happen. However, there is a seismic risk, as we saw yesterday (Wednesday).”
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