PCI Says Duck, Cover, Hold & Evaluate Your Earthquake Financial Risk

SACRAMENTO, Calif., Oct. 18 -- The Property Casualty Insurers Association of America issued the following news release:

This week's 4.0 magnitude earthquake in Hollis Center, Maine and the 23rd anniversary of the 6.9 magnitude Loma Prieta Earthquake in Northern California are just the most recent reminders that earthquakes occur in every region of the country. Today, more than 14 million Americans took steps to prepare for earthquakes by participating in "Great Shakeout" earthquake drills across the country, says the Property Casualty Insurers Association of America (PCI).

"Individuals, businesses, and schools across the country used the Great Shakeout as an opportunity to test lifesaving earthquake preparedness skills," said Christopher Hackett, PCI director of personal lines policy. "However, it is a great reminder that we should also test our financial preparedness by considering the risk our homes or businesses face in the event of an against earthquake."

PCI encourages everyone to be prepared for earthquakes, the least predictable of potential natural disasters. With population growth in areas of intense seismic activity, the risk of catastrophic loss of life and property damage continues to rapidly increase. According to the Federal Emergency Management Agency (FEMA) it is estimated that a major earthquake in a highly populated area of the United States could cause as much as $200 billion in losses. Despite facing this major risk, many Americans do not purchase earthquake insurance. For example, in earthquake-prone California, only 12 percent of homeowners purchase earthquake insurance.

"For many in Northern California, October 17th conjured up lots of memories of the Loma Prieta Earthquake as the San Francisco Giants played in the National League Championship Series," said Hackett. This 6.9 magnitude quake killed 69 people, injured 3700 more and caused $1.6 billion in insured damage. "Still today many people don't realize that earthquake coverage is not included in a typical homeowners insurance policy. Homeowners in earthquake prone areas need to consider their risk and consider buying this additional coverage to protect their most expensive asset - their home."

The standard homeowners policy does not cover losses that result from earthquakes due to the unpredictability and widespread catastrophic nature of these events. In addition, it is important to note the standard homeowners policy also does not cover landslides, mud slides or sink holes. Coverage is generally available as an endorsement to the homeowners policy or under a separate policy.

Earthquake insurance is designed to provide coverage for catastrophe losses. Consumers are protected from the damage caused by the shaking that results from the movement of the earth. The deductible for earthquake insurance varies based on the policy and the insurer. These deductibles are generally based on a percentage of the replacement value of the home. The deductible can range from two to 25 percent of the home's replacement value. In California, the standard deductible is 15 percent. However, for an additional fee consumers can now lower their deductible to 10 percent and raise the limits for contents and loss of use to $100,000 and $15,000 respectively.

"Earthquakes are a risk from Alaska to Maine," said Hackett. "We hear a lot of reminders to prepare physically for earthquakes including storing food and water, bracing water heaters and booksAriales, but it is equally important to talk to your agent or insurance company and assess your financial risk."

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