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Property & Casualty Insurance/General Insurance coverage in event of a Earthquake.

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Earthquake
Earthquake  
General Insurance Policy.
General Insurance Poli  
QUESTION: Dear Kevin

http://en.wikipedia.org/wiki/General_insurance
http://en.wikipedia.org/wiki/Earthquake‎

Can Apartment / Bungalow property owners claim their Insurance on occurrence of earthquake ?.

Do General Insurance policies provided by Public or Private limited cos cover insurance coverage for natural disaster such as Earthquake ?.

Awaiting your reply,

Thanks & Regards,
Prashant S Akerkar

ANSWER: Prashant,

Most standard insurance policies - both commercial and residential - do NOT cover damages associated with earthquakes. The primary reason is that this peril ordinarily results in such widespread and total devastation that it would financially decimate most companies.

Earthquake policies are usually underwritten by special governmental programs and heavily subsidized - mainly for political purposes. These policies are usually not actuarially sound in the cost of premiums when considered against the potential maximum loss.

Hope this helps.

Kevin Hromas
JD, EGA, RPA, PLCS, HCRI-R/C, CPIU, WIND® Umpire
Kevin Hromas & Associates
... A Division of US Insurance Information LLC
www.KevinHromas.com


---------- FOLLOW-UP ----------

QUESTION: Dear Kevin

Thank you.

How earthquake non life insurance product is different from "Protection from fire" non life insurance product ?.

Scenario
--------

Self Owned Apartment / Bungalow - Protection from fire insurance product will cover all the materials inside the apartment viz television set, freeze, washing machine, microwave oven, wall clocks, furniture etc and a yearly/quarterly premium will have to be paid by the policy holder. Typically in a fire the structure may or may not come down while in a earthquake, mostly the structure will come down.

How the calculations will take place for deciding what premium to be paid by the policy holder in a protection from earthquake insurance product ?.

i.e. Materials cost + ? = Premium cost to be bear by the earthquake insurance product Policy Holder.

what is ? here

Awaiting your reply,

Thanks & Regards,
Prashant S Akerkar

ANSWER: Prashant,

The difference is found in the "insuring agreement" which is generally located near the first portion of most real property policies. That "insuring agreement" usually states something along the lines of: "We insure for direct physical loss of the property described in the declarations unless said loss is excluded within the terms and conditions found within this policy." This is known as an "all risk" policy and would cover all perils unless specified in the exclusions. Those exclusions almost universally exclude earth movement as the source of the damages.

It might be possible to acquire Apartment/Bungalow Protection coverage for damages which might be excluded under the physical building policy but it would require the special "earthquake" policy.

Apartment/Bungalow Protection is usually purchased by individuals who do NOT own the property they are living within. They need to have that protection because the property policy does NOT cover contents not owned by the building owner.

Always looks at a policy as containing 2 (or more) parts: one part is the physical building itself, the second is the personal belongings or "contents" that are within. I use the example of imagine that you could take the building and turn it over and shake it out. Everything that fell out would be considered "contents" and everything that stayed put would be part of the "building".

In regards to your inquiry as to the Premium calculations that would involved, that is a question that requires a substantial amount of underwriting information from someone who specializes in earthquake underwriting. The size of the potential market, the maximum probable loss and the maximum possible loss (not the same thing), the actual type of building construction and a hundred other issues would all have to be part of the calculations ... so you see it is not a simple process.

Hope this helps.

Kevin

---------- FOLLOW-UP ----------

QUESTION: Dear Kevin

Thank you.

The "Property Protection from Earthquake" Non Life Insurance becomes an interesting product.


Example :


A Property (Flat in a building, Apartment, Bunglow) is worth INR 80 lacs (current market value) and contents within the property is INR 10 lacs. Policy commencement Date : June, 2013.

A "Property Protection from Earthquake" Non Life Insurance Policy is purchased from the company/corporation (insurer) which will cover the property structure and contents protection in event of a earthquake.

The insured is paying Rs 5 lacs premium yearly. Now Earthquake happens in June 2018 i.e. after five years. The property market value in June 2018 is INR 1 crore, 30 lacs.


The insurer while processing the claim for his property and contents in June 2018 will receive

INR 1 crore, 40 lacs (1 Crore, 30 lacs + 10 lacs)

OR

INR 90 lacs (80 + 10) ? from the insuring company.


Note : INR = Indian Rupees currency.


Awaiting your reply,


Thanks & Regards,
Prashant S Akerkar

Answer
Prashant,

Projecting out 5 years in the future would require that there was an automatic increase in policy limits that took place each year with a corresponding increase in premium each year.

If there were no increases in policy limits (even if there were inflationary increases in premium) then the original limits of INR 90 lacs (80 + 10) from the insuring company would apply IF there was a total loss to the building and contents.

There should be a document within the policy paperwork that outlines annual increases and establishes the limits of covered property. It is the Insured's responsibility to make sure that the limits available each year are sufficient. If the property increased in value over time, then they would have been required to pay higher premiums accordingly.

Kevin

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Kevin Hromas - JD, EGA, RPA, PLCS, WIND Umpire

Expertise

Insurance related issues for both commercial and residential property coverage. I am a licensed, executive general adjuster currently holding a Texas resident P&C license (614250), New Mexico non-resident all lines license (248774), Oklahoma non-resident P/F/M license (A299561), Florida non-resident P&C license (E117051) and a National Flood Insurance Program certification (06040100). My areas of expertise involve property and casualty issues in both residential and commercial policies with regards to claims practices and issues. I deal extensively with Lloyd's of London commercial policies and various domestic carriers for residential policies.

Experience

I am a licensed, executive general adjuster currently holding a Texas resident P&C license (614250), New Mexico non-resident all lines license (248774), Oklahoma non-resident P/F/M license (A299561), Florida non-resident P&C license (E117051) and a National Flood Insurance Program certification (06040100). My areas of expertise involve property and casualty issues in both residential and commercial policies with regards to claims practices and issues. I deal extensively with Lloyd's of London commercial policies and various domestic carriers for residential policies. After a 20 year career as a General Contractor, I was employed by Allstate Insurance as an adjuster in Texas, holding various postitions within the property claims department. After leaving Allstate, I specialized in handling losses associated with major catastrophes through-out the country. (Hurricanes Isabel, Charlie, Wilma, Katrina, Ike, etc., hail storms, floods.) I am currently retained as an expert by multiple insurance defense firms in Texas for issues in litigation in regards to claims issues and practices. I am also a certified Umpire for formal appraisals.

Organizations
Member - Society of Registered Professional Adjusters Fellow - Council on Litigation Management Member - Property and Casualty Association Member - Texas Independent Insurances Adjusters Association Member - National Association of Independent Insurance Adjusters Member - Houston Claims Association Member – Windstorm Insurance Network Member – Association of Property & Casualty Claims Professionals

Publications
Claims Magazine (www.ClaimsMag.com and then search 'Kevin Hromas' for a full listing of articles and quotes.) www.ClaimsPages.com, www.ProAdjuster.org, www.KevinHromas.com

Education/Credentials
JD - University of Houston Law Center - 1992 BA - Southwest Texas State University - 1980 AA - South Plains College - 1977 PLCS - Personal Lines Coverage Specialist

Past/Present Clients
Certain Underwriters at Lloyd's of London, Fulbright & Jaworski (Law Firm) Bracket & Ellis (Law Firm) Thamm & O'Briant (Law Firm) Sheehy, Ware & Pappas (Law Firm) Walker, Wilcox and Matousek (Law Firm) Financial Guarantee Underwriters

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