The Independent Insurance Agents & Brokers of New York has issued a timely warning in the wake of the earthquake that struck the east coast yesterday afternoon, which affected many New York residents.
The IIABNY reminded consumers that their homeowners and commercial property insurance policies might not cover resulting damage.
“Standard homeowners and commercial property insurance policies do not cover losses resulting from earthquake damage,” explained IIABNY Chair of the Board Christopher A. Brassard. “Many insurance companies offer the coverage for an additional premium. We encourage all homeowners, renters and business owners to consult with their insurance agents about whether they should buy earthquake insurance.”
The bulletin noted that “while the Empire State is not known for seismic activity, earthquakes are not unheard of there. A 5.8 magnitude quake struck near the Canadian border town of Massena in 1944, causing $2 million in damage (equal to $25 million today.) As recently as 2002, a 5.3 magnitude quake occurred near Au Sable Forks in the Adirondack Mountains. Even New York City has seen earthquake activity, suffering a magnitude 5.5 shock in 1884 that was felt in central Virginia and Cleveland, Ohio.”
Given the concentration of people and the number of large cities along the eastern seaboard, potential losses could be extremely high. However, the IIABNY pointed out, “virtually all property insurance policies contain terms that eliminate coverage for losses caused by ‘earth movement.'”
That doesn’t mean that property cannot be insured for losses from earthquakes, as coverage is actually “more readily available as an option in New York than it is in California and other western states.”
The IIABNY explained that insurance companies “ordinarily offer it with a deductible equal to a stated percentage of the replacement cost of the building. For example, suppose a homeowner buys a policy with a five percent deductible on a home that would cost $200,000 to rebuild. The homeowner would pay the first $10,000 of an earthquake loss before the insurance company would pay.
Source: IIABNY
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