If you own a condo located in an area at risk for earthquakes, you or representatives of your condo association will want to check with your insurance agent about purchasing condo structural earthquake insurance.
Insurance Requirements When Purchasing a Condo
A lender will usually require a condo to have the proper insurance to protect its investment. This is particularly true when purchasing a condo in an area prone to natural disasters like earthquakes, floods or hurricanes. Check with the condo association to find out what disaster coverage the association provides before you buy the condo. Some associations have opted not to have earthquake coverage or have reduced coverage because recent increases in earthquake insurance premiums would substantially raise association fees.
Stand Alone Coverage
If a condo association does not have earthquake insurance, individual condo owners can purchase stand alone coverage. However, when you take in the big picture this may not be a practical solution. Think about it. If half of the condos are severely damaged, but not all of them are insured, what will happen? If the unit above yours has been compromised and is not insured or repaired, these structural problems can lead to more trouble like water damage when it rains.
Not only is stand alone condo structural earthquake insurance impractical for this reason, but also for the fact that premiums can be extremely high and coverage often only covers if underlying coverage is also purchased.
Condo Structural Earthquake Insurance Considerations
In California, condo homeowner association boards are being faced with increasing earthquake insurance premiums. If you already own a condo, encourage your condo's board of directors to investigate their insurance options and collect the necessary information to make the best decision about earthquake insurance coverage:
- Attain a risk analysis for your type of development and geological location
- Contact multiple insurance companies for earthquake insurance bids
- Provide condo owners with pertinent facts and survey them to see where they stand on the issue
- Find out if the increased premium costs are in excess of allowable limits for increases in regular assessments. If they are, the association membership will have to vote to gain approval.
It Can Happen to Your Condo
It's easy to think of earthquake damage in high risk places like California. However, locations like southern Illinois, South Carolina and Boston, Massachusetts have also experienced earthquakes. In fact, since the beginning of the 20th century, 39 states have had earthquakes. Even a small earthquake can damage your roof or the foundation of your condo.Basic homeowners insurance, or condo and renter's insurance policies do not cover earthquake damage. If you want coverage, it must be purchased as a separate policy. So even if your condo is not located in an area where earthquakes are common, condo structural earthquake insurance may be needed. It's worth investigating and discussing with your association's board members.
Understand Your Coverage
If your association has earthquake coverage, check to see exactly what it covers to be sure it will adequately cover the cost to repair structural damage to your condo. Here's what you need to know:
- What deductible must be met before the insurance pays for damage?
- How much does the policy cost each condo owner?
- What are the coverage exclusions and limitations?
- What perils are covered? Special perils should at least cover structural claims. Coverage for personal property claims would also be a benefit to the condo owners.
- Are accessory structures such as garages also covered?
Earthquake Insurance Rates
Insurance companies determine earthquake insurance rates in a number of ways. In general, older buildings cost more to insure. Structures made of wood tend to get better rates than brick buildings. The area in which your condo is located will play a big part in how much you pay. Geographical areas are graded on a scale of 1 to 5 for likelihood of earthquakes. This number will be reflected in the amount of your premium. Structural earthquake insurance for condos differs from policy to policy. Read the entire policy to know what is and is not covered.