Ch. 11 - Earthquake and Volcanic Eruption

Earthquake and Volcanic Eruption

• It only covers the earthquake that is caused by the volcanic eruption, not the eruption itself.

• It can also just be called Earthquake Insurance or Earth Movement Insurance.

What is covered?

pg. 2

• Earthquake Coverage is always a rider. It is not possible to buy just Earthquake Coverage. This coverage must be added (as an endorsement) to an existing Property Policy that will provide the Basic, Broad, or Special coverage.

• In addition to covering earthquakes, the endorsement covers the underground rumbling from a volcanic eruption. Earthquakes, by definition, are subterranean creatures, but volcanoes have an above-ground component as well.

• Remember that the above-ground effects of a volcanic eruption are covered with the Property Policy under even a Basic Cause of Loss form. So, we can say that the earthquake endorsement covers volcanoes, but only the underground volcanic action.

• Government action is excluded in virtually all policies. If the government action destroys the property or the government requires the property to be destroyed, there is no coverage.

• It has its own unique deductible, which is expressed not in dollars but as a percentage of the total amount for which the property is covered. Typically, the earthquake deductible in the U.S. is 5 percent of the policy limit, except in earthquake-prone California, where it is 10 percent.

pg. 3

• Insurers treat all tremblors that occur within a seven-day (168-hour) period as part of a single quake.

• This, of course, prevents the Insured from having to pay a new deductible for each aftershock.

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