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Chapter 2 Property and Casualty Insurance for Homes and Businesses
Floods and Earthquakes
You may have noticed that none of the policies described in
Figure 2-1 covers damage from floods or earthquakes. These perils
are covered by separate policies. The next sections discuss earthquake
insurance and flood insurance.
Earthquake Insurance
Earthquakes can be very destructive. The 2011 earthquake that
struck northeast Japan was the strongest to ever hit that nation. More
than 18,000 people lost their lives to the quake. The quake caused
about $180 billion in damages, but only $35 million worth of damage
was insured.
Each year in the US, about 5,000 earthquakes strike. The most
costly US quake was the 1994 Northridge earthquake in southern
California. It caused about $25 billion in property damage. Despite
the somewhat common occurrence of earthquakes in California, only
about 12% of the state’s homeowners carry earthquake insurance.
Earthquake coverage is available as an add-on to a standard
policy or as a separate policy. An add-on is called an endorsement.
Comprehensive insurance on automobile policies covers earthquake
damage, however. Earthquake insurance is covered in more detail in
Chapter 3.
Flood Insurance
Flood insurance is a different story from other insurance.
Congress created the National Flood Insurance Program (NFIP) to
provide flood insurance. The goal of the NFIP is three-fold: to protect
Ethical Insurance
Practices
Insurance professionals
must abide by high ethical
standards in the work
they do. While laws and
regulations require some
forms of ethical behavior,
more than laws motivate
insurance professionals.
Selling fair policies at
reasonable prices and
upholding promised
coverage is not only the
right thing to do, it makes
good business sense.
The Northridge
earthquake hit California
on January 17, 1994. It
caused an estimated
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Source: FEMA News Photo (Andrea Booher)