Natural disasters and storms happen all of the time. Often in unexpected places. The weather is changing and storms are on the horizon. You may need to give some thought to your property insurance coverage. Many times, you’ve seen pictures on television of flooding caused by rivers, hurricanes, and other causes. Totally unexpected natural disasters like earthquakes and floods hit frequently. Natural disasters can hit at anytime and anywhere.
If a natural disaster hits, I hope your family and your real estate investments come through it unscathed. However, if damage does occur, do you have enough insurance to repair your investment properties? Both flood and earthquake damage require policies separate from the basic hazard insurance.
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Disasters such hurricanes and earthquakes occurred in places where people don’t expect them to happen. Basic insurance often covers the wind damage from a hurricane but no flood or earthquake damage.
If you don’t know how much coverage you have, now is the time to pull out your policies and read them. If you decide you need more coverage, now is also the time to put it in place. You won’t be getting any advance warning before an earthquake. And after the National Weather Service announces a hurricane is forming, insurance companies won’t be writing new policies or increasing existing policies.
The cost of flood insurance depends if it is in a designated flood zone or not. A basic policy outside of a flood zone typically starts at about $200 a year. Most earthquake insurance for the east coast (where earthquakes are unusual) starts at around 50¢ per $1,000 of property value.
If you don’t want to take out earthquake insurance, you might want to study up a little on what you can do to minimize possible damage. On the more earthquake prone west coast, insurance companies require a few structural improvements be made before they will insure a house. One is strapping the hot water tank to a wall. Another is bolting chimneys to the house walls. Stick built structures can also have walls better secured to the foundation.
One important key to surviving even a modest earthquake is if it was built before or after the big San Francisco shake in 1906. It was that massive earthquake that inspired national changes in building codes. Masonry structures that are two or more stories tall were required to have rebar reinforcement.
Don’t think you need earthquake insurance where you are? Here is some information that might make you think about that again. About 12 years ago, an earthquake epicenter shifted just under the Great Lakes sending shock waves as far north as Toronto, Canada. There is also the New Madrid Fault running through Tennessee, Missouri, Kentucky, and Arkansas. The Insurance Information Institute estimates a 40% to 63% chance of a 6.0 magnitude quake from the New Madrid Fault some time in the next 15 years.
Don’t let an “All Perils” policy fool you. It’s a deceptive policy title. When you read the policy, in all likeliness, you’ll find a list of exclusions that read like a geology textbook. Most of them don’t cover landslides, floods, mine subsidence, mudslides, mudflows, volcanic eruptions, surface water, sewage, and a long list of other problems.
Your part of the country might be hit with a major natural disaster tomorrow or it might not happen for 25 years. But today is the day to be sure you have the property insurance that you need.
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