How do I buy earthquake insurance?

The standard conditions of a fire insurance policy exclude damage directly or indirectly caused by earthquake. If you want earthquake to be covered, your fire insurance policy must be extended and, of course, you have to pay additional premium.

From the technical standpoint, the risk of earthquake is broken into two components:

  • Earthquake fire – fire damage due to earthquake
  • Earthquake shock – shock damage without fire damage.

You cannot buy earthquake shock insurance unless you also have earthquake fire insurance for the same amount.  You cannot get earthquake fire insurance unless you also have the basic fire insurance policy for the same amount.

The reason for all this is that, during an earthquake, a fire can conceivably start independently of an earthquake, but it may be impossible to distinguish the shock loss from the fire loss… Also, the shock can cause a fire, and if the property is not insured against fire, who will be able to figure out from the rubble which is the shock damage and which is the fire damage?

The only way you buy earthquake shock insurance without also having to buy earthquake fire or basic fire insurance is when you want to cover a foundation, swimming pool, pier, water tank, underground tank, or a self-contained industrial furnace. The reason for this is that these items are not exposed to the risk of fire.

Loss of damage resulting from earthquake shock only is subject to a deductible. From your claim, the insurance company will deduct the equivalent of two percent of the actual value of the insured property.

The standard motor vehicle policy also excludes earthquake. But, you can cover against earthquake only as an extension of the basic motor vehicle and lumped with the risks of flood, typhoon, volcanic eruption and other convulsions of nature. All these risks are available to you at the combined rate of one percent of the insured value of the vehicle.

While earthquake premiums, both in fire and motor car insurance, are regulated by the Insurance Commission, there is actually a lot of haggling in the market. Ask your agent or broker. He should be able to get you a good deal.


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