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Encyclopedia > Earthquake insurance

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Insurance is a system to alleviate financial losses by transferring risk of loss from one entity to another. ... Global earthquake epicenters, 1963–1998 An earthquake is a trembling or a shaking movement of the Earths surface. ... Home insurance, or homeowners insurance, is an insurance policy that combines insurance on the home, its contents, and, often, the other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home. ...


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. Rates may be cheaper for homes made of wood, which withstand earthquakes better than homes made of brick. In an insurance policy, the deductible or excess is the portion of any claim that is not covered by the insurance provider. ...


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 city, 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. This article is about weather phenomena. ... Generally, risk management is the process of measuring, or assessing risk and then developing strategies to manage the risk. ...


California

Earthquake insurance has become a political issue in California, whose residents purchase more earthquake insurance than residents of any other state in the U.S. After the 1994 Northridge earthquake, nearly all insurance companies completely stopped writing homeowners' insurance policies altogether in the state, because under California law (the "mandatory offer law"), companies offering homeowners' insurance must also offer earthquake insurance. Eventually the legislature created a "mini policy" that could be sold by any insurer to comply with the mandatory offer law: only structural damage need be covered, with a 15% deductible. Claims on personal property losses and "loss of use" are limited. The legislature also created a quasi-public (privately funded, publicly managed) agency called the CEA California Earthquake Authority. Membership in the CEA by insurers is voluntary and member companies satisfy the mandatory offer law by selling the CEA mini policy. Premiums are paid to the insurer, and then pooled in the CEA to cover claims from homeowners with a CEA policy from member insurers. The state of California specifically states that it does not back up CEA earthquake insurance, in the event that claims from a major earthquake were to drain all CEA funds, nor will it cover claims from non-CEA insurers if they were to become insolvent due to earthquake losses. [1] (http://www.earthquakeauthority.com/about/about.html#top) State nickname: The Golden State Other U.S. States Capital Sacramento Largest city Los Angeles Governor Arnold Schwarzenegger Official languages English Area 410,000 km² (3rd)  - Land 404,298 km²  - Water 20,047 km² (4. ... The United States of America — also referred to as the United States, the U.S.A., the U.S., America, the States, or (archaically) Columbia—is a federal republic of 50 states located primarily in central North America (with the exception of two states: Alaska and Hawaii). ... The 1994 Northridge earthquake occurred on January 17, 1994 at 4:30:55 am Pacific Standard Time in the city of Los Angeles, California. ...


Japan

The government of Japan created the "Japanese Earthquake Reinsurance" scheme in 1966, and the scheme has been revised several times since. Homeowners may buy earthquake insurance from an insurance company, usually as an optional rider to a fire insurance policy. Insurers enrolled in the JER scheme who have to pay earthquake claims to homeowners share the risk among themselves and also the government, through the JER. The government pays a much larger proportion of the claims if a single earthquake causes aggregate damage of over about 1 trillion yen. The maximum payout in a single year to all JER insurance claim filers is 4.5 trillion yen; if claims exceed this amount, then the claims are pro-rated among all claimants. Property insurance provides protection against risks to property, such as fire, theft or weather damage. ... A 1,000 yen note, featuring the portrait of Natsume Soseki. ...


  Results from FactBites:
 
Earthquake insurance - Wikipedia, the free encyclopedia (477 words)
Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property.
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.
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.
  More results at FactBites »

 
 

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