Housing Counselor Certification (HUD) Practice Exam

Which factor can impact the cost of earthquake insurance?

1. Location of property

2. Structural material

3. Ages of residents

4. Size of the family

The correct answer is: Structural material

While multiple factors can influence the cost of earthquake insurance, structural material is particularly significant in determining premiums. Buildings constructed with different materials exhibit varying levels of resilience to seismic activity. For example, a home built with reinforced concrete or steel is typically more resilient and incurs lower premiums than one built with wood or older materials, which may not withstand earthquakes as effectively. Insurance companies assess these risks based on construction types, leading to differential pricing for similar properties in terms of location. The location of the property also plays a critical role; homes situated in high-risk seismic zones are usually at a higher cost for insurance. However, when focusing strictly on structural material, it holds more weight in insurance assessments due to direct impacts on the likelihood of damage during an earthquake. Factors such as the ages of residents and the size of the family generally do not have a direct effect on the insurance premiums for earthquake coverage, making structural material the most relevant choice in this context.