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Should I buy Earthquake Insurance ?

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When we were kids, we have experienced very few earthquakes. But ask any 5-year-old kid today and he is most likely to have experienced a few already. This is because the frequency of earthquakes in India has increased significantly over the past decade. With increasing human activity such as mining and building of dams and an increase in the number of high-rise apartments, there are several factors that have contributed to the rising number of earthquakes.

The situation is not going to change anytime soon giving rise to the question that should I buy earthquake insurance

What is an Earthquake Insurance?

Just like a house insurance pays for the rebuilding of house after a calamity, such as fire, flood, riots, theft, burglary, an earthquake insurance provides coverage for dealing with the destruction caused due to earthquakes. It is important to note than an earthquake insurance is an insurance that you purchase in addition to your home insurance policy. Depending upon the area you live in and the probability of the area getting an earthquake, the cost and coverage of the policy may vary.

Does Homeowner Insurance Cover Earthquakes?

Homeowner insurance covers earthquakes as it is part of home insurance policy. The insurer specifically compensates the policyholder in case their house is damaged by earthquake. The best earthquake insurance policies will provide coverage in case of both partial as well as total loss/damage to your house.

What does an Earthquake Insurance Cover?

For homeowners, earthquake insurance typically covers:

• Your home building – It provides the same amount of coverage for your house as a home insurance policy.

• Your belongings – The content of your house including your electronics and furniture.

• Cost of living – The cost of living elsewhere while your home is being repaired after an earthquake.

If you are a tenant, you can still buy an earthquake insurance policy that will cover your personal belongings and cost of living/moving.

It is important to note that an earthquake insurance may or may not cover damages caused due to fire or flooding followed by an earthquake. Please check your insurance documents to be sure about all such technicalities.

Are All Earthquake Damage Covered?

Earthquakes can lead to severe damage creating various problems down the road. However, not all damages will get covered under earthquake insurance. For example, let’s say an earthquake causes a pipe in your home to burst, leading to extensive water damage. In this case, it would likely be your homeowner insurance that would pay to repair this damage. However, if the earthquake caused water to flood your home from an external source, your flood insurance would provide coverage.

But if an earthquake caused a fire in your home, standard homeowners insurance would again likely kick in.A comprehensive car insurance policy would pay for repairs if an earthquake damaged your vehicle.

Also, insurer will not provide coverage for loss of rent under earthquake insurance, if tenant leaves the house and it is no longer in the condition to go on rent again. You will need to have a loss of rent cover under home insurance policy, to get coverage during this type of situation.

In short, earthquake insurance doesn’t cover all damage that an earthquake causes. In many cases, other types of insurance would cover repairs or replacement of damaged property, but you should still receive the coverage you need.

Factors to Consider While Buying Earthquake Insurance

• Your proximity to active faults

• How much time has passed since the last earthquake

• Frequency of earthquakes in your area

• Whether your home was built with earthquake-preparedness in mind

• The type of land your home sits on, including the type of soil and the slope of the land

• The value of your home and its contents

• The amount of annual rainfall

How Earthquake Insurance Rates are Determined

Premiums for earthquake insurance will depend on your coverage limits, deductible and a handful of other factors, including:

• Your ZIP code

• The number of stories in your house

• The age of your home

• Rebuilding cost of your house

• The soil type on your property

• Materials used in building your home

• Your area's proximity to fault lines and seismic activity

Why is an Earthquake Insurance Important?

Depending upon the severity of the earthquake, the damages caused can be significant. In worst cases, you might lose both the house and all its belongings. Getting a house rebuilt is no small feat and you will need financial assistance which an earthquake insurance policy can offer.

Reconstruction cost can vary from INR 1,800 to 3500 per square foot depending upon the design of the house. In order to build a 2,000 square foot house, you need to shell out INR 35-70 lakh, for which an earthquake insurance premium can begin for as low as INR 2100/year.

Conclusion

India is prone to natural calamities, and unfortunate events like earthquakes can lead to irreversible damage. Therefore, buying earthquake insurance cover and a homeowner insurance policy is advisable, which will help provide complete protection to your home and let you live with peace of mind. With an HDFC ERGO home insurance policy, you can cover belongings worth up to Rs 25 lakhs.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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