EXPLAINER: Does insurance cover earthquake damage?

A magnitude 7.8 earthquake struck Mindanao on Monday, centered off the coast of Sarangani. The Office of Civil Defense (OCD) has so far reported 37 deaths, while several buildings have been damaged or outright collapsed.

A number of the victims may be considering the medical expenses they're facing or the damage to their property and thinking: Is this covered by my insurance?

What is an “Act of God”?

In insurance, an “Act of God” refers to natural disasters that people cannot prevent or control. The Insurance Commission (IC) explicitly recognizes this as earthquakes, typhoons, floods, and volcanic eruptions.

In the Philippines, the term “Acts of Nature” has been preferred after the onslaught of Tropical Storm Ondoy (international name: Ketsana). The Philippine Health Insurance Corp. (PhilHealth) also uses the term “fortuitous event.”

PhilHealth coverage

Filipinos hospitalized or treated due to an earthquake are given access to special benefits which apply once a state of calamity or emergency is declared, as provided for in PhilHealth Circular 0034 s. 2013:

• An extended claims filing window where hospitals and patients are given 120 calendar days from the date of discharge to submit claims.
• No 45-day benefit limit. The standard cap on hospital stay benefits is lifted for admissions directly or indirectly caused by the fortuitous event.
• Coverage for non-accredited facilities. Reimbursements may still be made even if a DOH-licensed hospital or improvised facility is not PhilHealth-accredited.
• No balance billing (NBB). Private hospitals are encouraged not to charge beyond PhilHealth rates.
• Priority claims processing. Claims under fortuitous events must be processed within 30 calendar days or less.
• Indigent patients with no capacity to pay can be onboarded in facilities through the Medical Social Welfare Officer of government hospitals.

For property

Natural disasters are not always automatically covered by insurance. In many cases, homeowners have to pay extra to add this protection to their policy.

For houses and buildings, earthquake protection is usually purchased separately and added to a basic fire insurance policy.

Based on the IC’s Schedule of Rates for Earthquake, insurers should charge at least 0.10% of the sum insured per year for earthquake coverage, with a mandatory 2% deductible based on the property’s actual cash value for each claim.

This means that a home insured for P2 million may need an additional premium of about P2,000 a year for earthquake protection. However, homeowners may still have to shoulder part of the loss. For a house insured for P2 million, the owner may have to pay up to P40,000 before insurance starts covering the damage.

For vehicles

Former IC Commissioner Dennis Funa earlier clarified that the Compulsory Third-Party Liability (CTPL) motor insurance does not cover damage caused by earthquakes, floods, typhoons, or other natural disasters.

Under IC Circular Letter 2021-54, car owners usually need to pay extra for "Acts of Nature" coverage if they want protection from natural disasters.

How to file a claim

After a disaster, policyholders should contact their insurer as soon as possible and take photos or videos of the damage. Some insurers may also ask for proof from government agencies or local officials that the area was affected by the earthquake.

Homeowners and vehicle owners should prepare documents showing that they own the damaged property, such as land titles or vehicle registration papers. Insurers are then required to process claims within 30 days of receiving complete documentation.

If an insurance company rejects a claim or fails to respond, policyholders can ask the Insurance Commission for help through the Claims Adjudication Division (CAD).

For claims of P400,000 and below, a Statement of Claims is sufficient, while a Verified Complaint is needed for claims over P400,000 up to P5 million, on top of a Certificate of Non-Forum Shopping.

The IC will then review whether the complaint is sufficient in form and substance. Those deemed sufficient will be docketed, and will be charged fees ranging from P1,000 to P15,000 depending on the amount claimed. Intake and docketing takes approximately three days.

It is important to remember that not all insurance policies automatically cover earthquake damage. Whether you can file a claim depends on the type of insurance you have and whether you paid for earthquake or Acts of Nature coverage. — BM, GMA News