A letter-writer suggested Tuesday that “earthquake insurance doesn’t make sense.” This is a great opportunity to clarify how homes are valued under insurance policies, how outbuildings such as detached garages are valued, as well as the earthquake coverage itself.
Firstly, your B.C. Assessment bears little, if any, relation to the cost of rebuilding. Its own website confirms that it bases the value on approximate resale value, not replacement value.
If your home is destroyed by a fire, the insurance company must pay for the cost of debris removal before reconstruction can even begin. Then there are architectural plans, contractor fees, permits to obtain, etc. Remember, too, that you wouldn’t have the luxury of waiting until a contractor can begin work on your home, you may have to hire a slightly more expensive contractor that is available immediately.
On top of these expected costs, most homes can’t be built exactly as they were before, as bylaws and building standards change frequently. If the home had asbestos, knob-and-tube wiring, less than 100 amp services, an older in-ground oil tank, etc., all of these would have to be rectified.
So when we calculate the total cost of rebuilding your home, we factor in all of this, paying attention to the original details of the house: standard of original construction, floor coverings, custom fittings and fixtures, wall coverings, siding, and on and on.
In Greater Victoria, costs range from about $175 per square foot to $225 per square foot, all in.
In the writer’s example about a detached garage, the figure the insurance company used to determine replacement ($35,000) is not a true valuation.
All home policies include, at no extra cost, a percentage of the dwelling value — in this case 10 per cent — to cover any outbuildings. Only if you built an outbuilding that cost more than the percentage allowed would you have to pay a premium.
As regards to the earthquake coverage, the writer indicates, quite correctly, that the coverage is not designed to cover minor shocks.
It is meant to cover large, catastrophic events, where significant structural damage occurs. That’s the only way insurance companies are still able to offer the coverage.
And finally, I’m not sure why the reference to a tsunami is included in the discussion, as damage to a home caused solely by a tsunami would not be covered under any residential home policy in Canada.
Susan T. Bigelow is with SeaFirst Insurance Brokers.
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