There was a big, long earthquake last night felt in Anchorage and surrounding areas. The epicenter was near Kodiak and many on the big island and surrounding islands headed for the hills following a tsunami warning. It turns out that there was no tsunami and that is a good thing. It doesn't appear that there is any property damage (or very little) from reports received so far, but there could have been.
Earthquake is a catastrophic event and a big one can causes millions of dollars in property damage. So, what does your insurance do when earthquake damage hits? Well, the answer depends on what type of property we are talking about and what type of insurance is in place at the time of the loss.
When it comes to your auto, all you need is comprehensive coverage. Comprehensive is the coverage that pays for sudden and accidently damage that is not collision (with another vehicle or object) and not excluded. It includes, but is not limited to perils such as: fire, theft, wind, flying missiles (rocks or other debris kicked up by cars), falling objects (trees, airplanes, etc), flood (yes, flood is covered), collision with an animal, glass breakage and many others including earthquake! The personal auto policy (and the commercial auto policy for that matter) covers flood and earthquake under comprehensive coverage.
Your homeowners coverage is another matter, however. Earthquake damage is excluded in most residential and commercial property policies and must be added back on by an endorsement which will include a premium charge. It is not cheap. Typically, earthquake coverage can run from $1.50 per $1,000 in property coverage to $3.00 per thousand. If the price were $2,00 per thousand on a $200,000 value home, the price for the earthquake endorsement would be $400 per year (200,000 divided by 1,000 times 2.00 = $400.00).
One thing to be aware of, however, is the deductible. Earthquake coverage has its own unique, separate deductible. It is typically expressed as a percentage of the total coverage limit. For instance, a 10% deductible on a $200,000 home would be $20,000. The deductible is calculated using the coverage amount, not the amount of the loss. Additionally, there is also a deductible on the contents of the home as well. If our $200,000 value home has $100,000 in contents coverage, there would be an additional $10,000 deductible for damage to the contents of the home caused by an earthquake. This is in addition to the deductible on the structure.
While this may seem like a lot and not worth it, consider this before making your decision. If you have a $180,000 mortgage (on the home described above) and an earthquake levels it, you will still owe the $180,000 to the bank even if you did not carry earthquake insurance. Now, you have a mortgage, but no home to live in. If you had carried earthquake coverage, you would have a $20,000 deductible on the structure and a $10,000 deductible on the contents for a total of $30,000, but the home would be rebuilt to the same specifications it had prior to the loss (assuming you carried the correct replacement cost amount of coverage on the home). You would have the $180,000 mortgage still, but you would have a home to live in. If you don't carry earthquake coverage and suffer an earthquake loss, you will have the $180,000 loan and maybe a government loan of $300,000 (to rebuild the home and furnish it) for a total of $480,000 on a home worth $200,000. The government does not GIVE the money to rebuild the home, it LOANS it, so you would have two loans on one piece of property or one loan on a destroyed home.
There is no right or wrong answer to whether or not your should carry earthquake insurance. There is only an informed decision to make. You need all the information available before you can make that decision, so call your insurance agent today and ask questions about earthquake coverage for y our home.
One more thing. You typically cannot add earthquake coverage to a homeowners policy within 30 days of an earthquake in the area, so this decision is not one you make during or right after the earthquake, but one you make BEFORE the earthquake occurs. Most companies will let you add it, but wait for the 30 day period until it takes affect.
Be sure to contact your insurance agent and ask about earthquake coverage so you can make an informed decision!
Many licensed insurance professionals are required to continually education themselves in the insurance field as a requirement to keep their licenses in force. Certain licensees are NOT required to take continuing education (CE) such as a credit insurance licensee working at a car dealership or a title insurance licensee or a bail bond licensee. All producer licensees ARE required to take 24 hours of CE every two year renewal period. Licensed independent adjusters are also required to take 24 hours of CE every renewal period.
There are several ways a licensee can meet the CE requirements of the Alaska Division of Insurance (DOI): 1) take a live class, 2) attend a webinar or other internet based format or 3) self-study and pass an exam. All continuing education classes in Alaska must now be pre-approved for credit by the DOI and all CE providers must be licensed as CE providers by the DOI.
All licensees that are required to take CE within their renewal cycle must be sure that 3 of those 24 credits be in an Ethics class. The Ethics class MUST be taken inside the two year renewal cycle, the Ethics credits cannot be carried over from a previous renewal cycle. For any other approved credits, 8 of them can be carried over to the new renewal cycle, but only 8. For those that teach CE, only 8 hours can be obtained from any classes they teach.
The intent of this regulation is to have licensees constantly be working to educate themselves in the ever-changing insurance market. For those of us who take that seriously, we are looking to learn and expand our knowledge with the idea of becoming a better professional so we can better serve our clients and meet their insurance needs by presenting the best coverages for their risk exposures.
Regardless of the intent of the regulation, there will be times when the goal of the licensee is to just meet the letter of the regulation so they can remained licensed. There are places you can go and get your 24 hours of CE for a very low price, and quite possibly, you will be done in a couple of hours! These folks meet the requirement and they get their license renewed, but did they get any REAL education? Maybe, maybe not. I am not saying these folks are not competent, in fact, many are very competent, but I am saying that they are not getting any real education value by doing it this way.
I recommend folks take classes that will expand their insurance knowledge so they can serve their clients better by having more knowledge of the insurance products available (whether they sell them or not, knowledge is power and giving good advice to clients is key). Try to learn each and every day you work in the insurance industry. The more you know, the better it gets and this is often reflected in your salary!
So, get educated. Keep educating yourself every day, don't just meet the minimum standard of the CE regulation, use that minimum standard to rise above and excel. Clients don't want to have a claim, but they do want value for their premium dollar. There is great value in educating your clients so when a claim does arise, they do not carry misconceptions about their coverage into the claim handling process.
Do currently have a job that doesn't excite you? Do you dread going to work every day? Do you view it as a way to survive rather than a way to thrive? Would you like to have more say in your pay?
If the answer to any of these is yes, you may want to take a look at a career in the insurance industry. There are many different career paths you can take within the broad spectrum of insurance. Insurance producer (agent/broker), insurance adjuster, underwriter, rater, clerical positions, and support staff for all of the above.
Insurance is never going away and even when the economy goes up and down, we all have to consider insurance (auto, home, business, life, health, etc). Insurance is here to stay and there will always be opportunities for a motivated individual.
Do you have a desire to own your own business someday? There are ample opportunities within the insurance industry for people to own their own agency or adjusting firm as well.
Finally, this is one of the last true professions that do not require one to complete a college degree before they can begin their professional career. 50 years ago the insurance agent was not considered to be a professional and not held to many standards, but that has changed in the last 25 years and insurance professionals are recognized as such (and don't forget, held to professional standards) as they ought to be.
Please contact me if you are interested in a career in the insurance field. You can email me at: firstname.lastname@example.org or call me at 907-244-7391 or you can comment to this post. I recommending calling or emailing me for the fastest response. Thank you.
All my best,
Margaret Varlamos, CPCU, FLMI, AU, AIC, ACS, LUTC, CIC, CISR