Insurance Is A Necessity, Even In The Oc

Most residents would say that life in the OC, as Orange County is sometimes referred to

, is pretty good. The median income topped $84,000 in 2011 (more than $35,000 higher than the overall U.S. median income), according to Housing and Urban Development. With more than three million people living in 798 sun-drenched square miles, 42 miles of coastline, and nine beaches, Orange County is Californias third most populated county. As idyllic as it may be most of the time, even Orange County is susceptible to catastrophic events that could trigger a need for certain types of insurance.

Definition of catastrophe

Insurance companies define a catastrophe as an extraordinarily severe disaster, whether caused by natural forces or man-made. Insurers share information about these kinds of claims so they can derive a total amount that the industry has paid out in claims for the disaster. When damages from a catastrophe exceed a certain amount of claims paid to policyholders for insured damage (raised in 1997 to $25 million), the insurance industry considers it a catastrophic event. A mega-catastrophe greatly exceeds even that thresholdthink disasters such as Hurricane Andrew in 1992 and Hurricane Katrina in 2005, and the attack on the World Trade Center in September 2011.

The homeowners policy offers protection for the home from a variety of risks, including theft, fire, explosions, windstorms, hail, and even riots. Yet while hurricanes and terrorist attacks may not loom large on the radar in Orange County, earthquakes are definitely in our future. Consider California is home to one of the most expensive natural catastrophes, the Northridge earthquake of 1994. This mega-catastrophe rocked the insurance industry as hard as the earthquake shook the ground, with far more in damages than insurers had predicted such an event would cost, according to the Insurance Information Institute. The tremendous amount of property damage and financial losses resulting from all of the above occurrences prompted the insurance industry, government, and public policymakers to retool how they can better react and manage response in an organized fashion in the face of catastrophic events.

Homeowners policy excludes flood and earthquake coverage

Damages caused by flood or earthquake are not covered under the homeowners policy (although those risks are covered in the comprehensive portion of a standard auto insurance policy). To protect the home from those risks, homeowners must add a separate flood or earthquake policy to their basic homeowners coverage. A professional insurance agent can provide guidance on making these policy additions, and offer advice on the appropriate coverage amounts for the homeowners specific situation.

by: Robert Lockhart

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