Home insurance: ins and outs of coverage

Recently I wrote a column about the types of claims covered on your homeowner's policy. Our readers had a wealth of comments and questions. Here are just a few of the responses we received.

1. Earthquakes and fires in California
Pete Moraga, a communications specialist from the Insurance Information Network of California, explained the notion of "proximate cause." Moraga quotes the California Department of Insurance Web site:

"When an earthquake triggers other property losses (such as a bursting water pipe), the earthquake is referred to as the "proximate cause" of the damage, not the "direct cause." CIC Section 10088 states that unless earthquake coverage is in-force at the time of an earthquake, the resulting loss is not covered, even if the direct cause is a covered peril under your residential property policy."

This clause seems to suggest that unless earthquake coverage is in place, the resulting loss from an earthquake is not covered. In California, there is one important exception to "proximate cause":

"Fires in the aftermath of an earthquake can often pose just as much threat to property damage as an earthquake itself. CIC Section 10088.5 provides that your residential fire insurer cover all fire losses that are caused by or follow an earthquake, regardless of whether you have earthquake coverage. Fire is the only exception to the proximate cause law."

Moraga recommends that when you experience a property loss due to an earthquake, do not assume that the damage to your property is not covered.

2. State differences in insurance
Insurance laws vary greatly from state to state. My experience in California was that the lenders normally ask for insurance coverage based upon the loan amount. Most are willing to back away from that demand, provided that the owner insured the property for full replacement value.

According to an Allstate insurance agent from Oklahoma, this is not the case in his state:

"The mortgage company will not accept a policy for less than that amount at closing. They will not close the loan until the policy is written for an amount equal to or greater than the loan amount. If at renewal the insured lowers his coverage below the loan balance, the lender will put 'forced placed insurance' on the property to cover the loan amount and charge it to the insured." ...CONTINUED

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