What is an earthquake insurance?

Earthquake insurance is a form of insurance of homeowners that deals with damage caused by the earthquake. In regions where the earthquakes are particularly common, homeowners may be obliged to take an earthquake insurance, so in the case of an earthquake people rely less on government funds for disasters and more for their own insurance contracts. In general, the earthquake insurance is not part of standard insurance contracts and must be purchased separately. There may also be indirect damage caused by neighboring collapse of structures and highways, as well as bizarre forms of earthquake damage, such as car disposal in the living room or sink in the backyard. Fires and floods are also common problems due to earthquakes.

When homeowners buy an earthquake insurance, they can be protected against botc direct damage, such as structural collapse after earthquake, and indirect damage, such as fire caused by broken gas guidance. More often, insurance includes only structuraldamage caused directly by an earthquake. Insurance can pay for a complete replacement of the structure or for conversion depending on the type of insurance and the nature of the damage. Some politicians also cover damaged assets such as cars, and can provide live contributions so that the residents of the house temporarily move throughout the repair.

This type of home owner insurance is susceptible to unfavorable selection, in which only people in high -risk areas buy insurance. The problem with unfavorable selection for insurance companies is that it reduces a group of customers, so potential payouts are very expensive. For this reason, the earthquake insurance is often highly deductible to being very expensive.

Recognition of the need for an earthquake insurance, some governments provided subsidies for an earthquake insurance to reduce stress to the insurance industry. Insurance companies also carefully modify their risk funds and can EXistant strict requirements for the owner of the house to buy an earthquake insurance. For example, the house may be necessary for the safety of the earthquake, thereby reducing the amount of damage that occurs during the earthquake. For low -income house owners, this can be very difficult, as this leads to the cost of insurance for the earthquake out of reach, which in turn can make it difficult to obtain home loans, because many banks in areas susceptible to the earthquake insist on the earthquake as a loan condition.