Earthquakes, while not as frequent as other natural disasters, can occur without warning and cause tremendous damage to homes. According to the International Federation of Red Cross and Red Crescent Societies’ 2010 World Disasters Report, over the years, the costs of earthquakes have increased due to growing urban development near fault lines and the vulnerability of older structures not built to current building code.
Earthquake coverage: what you need to know
“It’s important for clients to know that earthquake insurance is not included in a standard home insurance policy, but it can be purchased as an add-on and typically is subject to a higher deductible,” explains Carolyn Andreacchi, personal insurance underwriting director at RSA Canada. For example, if an earthquake were to cause a gas main to break and ignite a fire, only the resulting loss or damage from the fire would be covered under the base home insurance policy, not damage related to the earthquake.
How much earthquake insurance should one have?
“As a broker, you are in the best position to help your clients evaluate how much earthquake insurance is adequate for their individual needs, should they find themselves in such a circumstance,” Andreacchi emphasizes.
Conversations with clients should include cost factors they need to consider, such as:
- Replacing household possessions
- Additional living expenses in the case of damage to the home following an earthquake
- Repairing or rebuilding their home
- Fulfilling financial commitments such as a mortgage or secured line of credit.
Why don’t many Canadians have earthquake insurance?
Andreacchi says the two common myths that need to be dispelled in assessing the need for earthquake insurance are:
- Slim chance of impact: The impact of an earthquake can affect surrounding regions as well, and the probability of a seismic event in Canada is rising.
- Existing coverage: Home insurance policies and government disaster programs do not provide a sufficient avenue for recovery.
What can brokers do?
“Earthquakes in Canada may seem a far-fetched risk to discuss for many homeowners,” Andreacchi says, “but we know that consumers rely on brokers for trusted, sound advice. Earthquake insurance is an excellent way to educate clients on their geographic risk and ensure they are adequately protected when disaster strikes.” Key information that brokers should share with their clients:
- Illustrate the math by sharing costs from similar or past disasters
- Identify those in high-risk zones and provide coverage options that match their budget and needs
- Help them develop a preparedness plan for their family
This article has been featured in Insurance Business, Expert Advice