Perhaps you are one of those folks who already include earthquake coverage on your property, but really don't know what it is. Maybe you are looking into purchasing a home and trying to figure out what you do or don't need, or maybe you have opted not to obtain the coverage on your home and/or business because you don't think you need it.
Earthquakes are a very real hazard in the Midwest. There have been at least 12 earthquakes with at least minor damage in the St. Louis, Missouri area in the last 200 years. You can look at earthquake maps, as well as get preparedness tips online at the US Geological Survery website. Earthquakes are a very real event and the likelihood that the St. Louis will experience additional earthquakes is 100%. The veracity of the earthquake is what is unknown. We have been extremely fortunate to have had very few earthquakes that have actually been "felt" by the general populace during the last 30 years.
Since earthquakes are a very real risk, most people want to transfer the risk of damage to their property to an insurance company. Once the decision is made to carry earthquake coverage, you need to determine how much coverage. Most insurance companies have very little options available for earthquake insurance. The basic differences are between coverage limitations and deductible amounts.
Coverage limitations may be an aggregate limit or a separate limit on the building and contents. An example would be if you insure your home for $200,000 and your contents for $150,000, your earthquake coverage may mirror those limits or perhaps be an aggregate combined limit of $350,000 for building and contents. The real difference between how these limits are offered is based on the deductible.
Most earthquake insurance is added as an endorsement to your policy. This endorsement normally carries a separate deductible. Years ago, a 2% deductible was common. Today it is 20% or 25% that most people carry. The deductible can be applied to your loss in a couple of different ways. It is important to ask when obtaining insurance as to how this deductible is applied. A 20% deductible (or even a 2%) is huge. The deductible will, in most cases, be applied to the limit. Per the example earlier, a $200,000 home would have a $40,000 deductible on the home and a $30,000 deductible on contents. If an aggregate limit is applied, per the example of $350,000 mentioned earlier, then a $70,000 deductible would apply. In the event of a major loss, the deductible ends up being the same, but in a smaller event, the split deductible would be preferable.
So, in short, the real message on what to look for in earthquake insurance is: to make sure you have it! Opt for the lowest deductible option available and ask if you can choose how the deductible is applied, aggregate limit or split limits on property and contents.
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