The cost of earthquake insurance and a look at windstorm insurance

One-third of residential insurance policies cover wind and hail damage — but only one-third of these policies adequately cover repetitive wind or hail events that cause more than one billion dollars in damage each year.

Some policies provide limited coverage to people who live in high-risk areas. While some insurers offer wind and hail coverage for these “eco-hazard” policies, the options are restrictive, and they are expensive.

Most people who live in coastal areas of the United States are not members of a club that carries this kind of coverage. And because most people who buy wind and hail insurance do not purchase the protections provided by a club, the typical homeowner with a high-risk home must do some legwork to get the insurance he or she needs.

“Right now, it is highly unlikely that most people will be able to change their risk or move their property,” says Danielle Costanzo, editor of the Solvency Initiative , a nonprofit group based in Montreal.

“Since 10 percent of buildings in the U.S. could be responsible for 50 percent of total losses in a given year, even using the best case scenario — which is that most insurers would provide the full coverage available under standard policy form — they would offer only 10 percent of policies covering this risk.”

The insurance industry estimates there are 1.7 million structures in the United States at high risk of wind damage. In addition, the insurers calculate that another 5,000 structures are at moderate risk for wind damage.

Coverage for high-risk buildings is only available from the Small Business Administration (SBA) and from the National Flood Insurance Program, which is a public entity. The SBA provides loans for home improvements that have the cost not to exceed 100 percent of the home’s current market value. In many cases, these government-sponsored insurance programs cover only a portion of the damage from wind damage.

Most insurance companies make policyholders get hurricane declarations before renewing the policy. Some add the additional coverage of windstorm or wave damage from storms. Insurers who build near high-risk structures must offer windstorm coverage on renewal. Insurers that do not offer windstorm coverage, but buy the necessary extensions from the SBA, do not require hurricane declarations from their customers.

To be insured on a yacht the cost of obtaining and covering hull damage would be $80,000 for an insured vessel with no loss. A 36-foot deck boat will likely cost $25,000 to insure against hurricane damage, says Ernie Craig, an agent with Wilson Insurance, a subsidiary of Warner Independent Insurance Group.

Coverage for wind damage

Here are the basic forms of windstorm policies, followed by some easy steps to obtain coverage:

Prefer the term windstorm? Use the definition available in your state; other states may have more specific language.

Contents coverage includes loss of work (e.g., tools and equipment), coverages for appliances and sheds or garages, and coverage for damage to trailers, boats and recreational vehicles.

In addition to hull damage, there is an umbrella (insurance for damage not covered by the hull), limits for windstorm and wave damage, hail, other storm-related damage, chemical contamination and transportation of products, and property damage if the structure is destroyed by storm.

Coverage can be added to existing insurance policies.

Do not assume that windstorm insurance also includes the additional costs of wind and hail insurance you already have.

Flexibility on where to buy the windstorm policy depends on the area and your market. Insurers will usually be willing to cover your windstorm coverage for a home near a state that has strong wind and windstorm policies.

If you purchase policies from a single carrier in another state, expect your coverages to be based on the local windstorm policies in that area.

Read more at CNN .

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