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Mudslide Disaster Hits Close to Home - Reinforces Need to Evaluate Insurance Coverage

The March mudslide near the small community of Oso, Washington killed more than 40  people and caused untold millions of dollars in property damage.  Although the area northeast of Seattle along the North Fork of the Stillaguamish River experienced occasional earth movement, there was no warning on the morning of March 22 before a portion of an unstable hill collapsed. Mud, soil and rock debris - 30 to 40 feet deep - raced across the river and buried a neighborhood four miles east of the town of 180 residents.   

The Oso mudslide is cause for reflection, for those who lost loved ones and for everyone else who received another reminder that life is fragile and fleeting. The disaster hit particularly close to home at HUB International Northwest's office in Bothell, Washington. One client, as well as the employee of another client, lost their lives in the mudslide. Local HUB employees donated thousands of dollars to the recovery effort and to the King County Search and Rescue team through a HUB GIVES fundraising drive. HUB International Northwest's Janiece Crouch helped locate victims who died in the mudslide, as a member of the search team. 

A Learning Opportunity 

If anything positive can be taken away from the disaster, it's this: homeowners can learn how to insure themselves against future calamities (such as mudslides, earthquakes, flooding) before they strike. HUB International Northwest's Amy DeForeest, the company's Regional High Net worth Practice Leader, and Sandi Esparza, its Personal Lines/Aviation Operations Manager, offer some tips and advice that may serve to guide HUB International clients nationwide. 

  • Mudslides, earthquakes and floods are not covered through standard homeowner's insurance. Instead, coverage is available through what's known in the industry as a "difference-in-condition" policy. Although mortgage companies and banks require flood insurance for dwellings located in a flood zone, there's no such mandate for homes in high-risk earthquake or mudslide areas. 
  • Homeowners whose dwellings are located at or near the bottom of a hill that has not been developed, are logical candidates for mudslide insurance. Likewise, homeowners in areas where earthquakes are common must seriously consider earthquake insurance. Although the stereotype of earthquakes is that they occur mostly in California and elsewhere along the West Coast, ABC News reported earlier this year that Oklahoma experienced 150 earthquakes registering 2.5 magnitude or greater within a 30-day period. 
  • Flood insurance isn't strictly for homeowners who live in a flood zone (next to a river, for example). A house situated at the base of a hill within a development where surface water run-off during heavy rain is directed downward (and thus into the homeowner's basement) is a candidate for flood insurance. But this only applies if at least one other property is affected by the conditions, according to the FEMA definition of flood (other flood insurance providers have varying definitions).   

The Numbers 

There are no exact figures available regarding the percentage of homeowners who possess earthquake or mudslide insurance (although, as mentioned, flood insurance is a requirement for those who live in recognized flood zones). In the state of Washington, where earthquakes have caused significant property loss over the years, only an estimated 14 percent of homeowners hold earthquake insurance. 

The reality of catastrophe insurance is that it's important but not cheap. The price tag associated with earthquake, mudslide and flood insurance varies by location, but those policies often cost at least as much as a basic homeowner premium. In addition, earthquake and landslide policies may carry a sizeable deductible:  typically, a minimum of 10 percent for the dwelling and another 10 percent for personal property. 

But homeowners should weigh the cost of catastrophe-related policies against their investment.  For many of us, our homes represent our single largest financial investment, and catastrophe insurance helps protect it.

Arm Yourself with Information and Be Proactive 

Homeowners can gather the information they need, and protect their investment in their dwellings, by doing the following:

  • Have a geological survey performed or contact your county or city government to learn if there's been any earth movement. This can shed light on the potential for landslides.  WARNING: Even if no earth movement has occurred to date, that doesn't mean it won't happen in the future. 
  • Retrofit older homes built in earthquake zones before stricter earthquake codes were enacted. Bringing an older home up to code can be expensive, but the cost of earthquake insurance may be cut by up to 50 percent following the retrofit. 
  • As a cost-savings measure, you may select a value for flood, earthquake and mudslide insurance that's lower than the replacement cost carried on the homeowner's insurance policy. For example, a homeowner might choose an earthquake policy that covers only the amount that the homeowner owes the lender. CAUTION: This tactic is not feasible where a homeowner's policy includes a coinsurance clause, which penalizes the homeowner for not insuring the dwelling to its full value in the event of loss.   

Final Thoughts 

The best advice is this: ask questions.  If you have concerns about your homeowner's policy (as it relates to disaster coverage or any other variable) contact your HUB broker. A simple phone call or meeting will provide you with information you need to help determine what steps to take (if any) before a potential disaster strikes. 

DeForeest points to the example of Hurricane Sandy and its aftermath, when many people in New York and New Jersey learned the hard way that their regular homeowner's policy did not cover wind or hurricane damage. 

"HUB International brokers never want their clients to assume that there's coverage," DeForeest explains. "Instead, we want to them to call and ask questions, so that we can determine explicitly whether or not they have coverage. We don't want them guessing. The stakes are too high." 

Visit the HUB Crisis Management Center for more tips on disaster preparation and how to prepare for a potential crisis situation.