In the aftermath of the 3/11/2011 earthquake and tsunami disaster in Northeast Japan, given the horrendous loss of human life it may seem trivial to discuss the property losses involved. Yet, to serve our clients we must attempt to offer the best advice and information possible. What if this disaster had occurred in the North Atlantic? How would we react and what part would insurance play for the typical homeowner? What coverage would the typical Homeowner policy provide? The short answer is that in all likelihood there would be little or no coverage under most Homeowners policies.
- A very small percentage of homeowners buy earthquake coverage in New England. Homeowners policies normally exclude earthquake coverage. The coverage can be added by endorsement in most cases for an additional premium. It is seldom requested but consideration is recommended.
- Damage caused by a tsunami is flood damage. Flood is excluded under all Homeowners policies. To obtain flood coverage, a separate policy issued by the Federal Flood Insurance Program is available. The truth is a flood policy is seldom purchased unless a bank is mandated by federal law to require flood coverage when making a loan a high risk area. In a high risk area, there is a 26% probability of a flood claim over the life of a 30 year mortgage. Yet, everyone lives in a flood area though perhaps not a high hazard area. The premium charged for flood coverage reflects the area’s exposure to flood. Tsunamis can’t happen here.? In 1929, a tsunami resulting from an underwater landslide struck Newfoundland with waves 2 stories in height. 28 perished in the aftermath. In the past 500 years, researchers have evidence of 88 tsunamis having occurred in the Caribbean – some resulted in significant loss of life and property.
- Nuclear Damage – either by war or accident – is excluded in all policies with the possible exception of fire as a direct result. Coverage normally can not be purchased.
- Finally, the loss of power can create many related loss situations. Loss of refrigeration, loss of use of a home are examples. These types of losses, if covered at all, are usually covered for very short periods of time and for very limited dollar amounts.
Nothing can undo the devastating loss of life and huge property losses suffered by the Japanese people. Their industrious nature, independent spirit, civility, and work ethic provide them with great strengths to deal with this human tragedy. How can we prepare for such devastation?
