Earthquake Risk: Are You Covered?

By Gary Bangstad on January 30th, 2010

Homeowners Insurance

You are a responsible homeowner, and have protected what may be your largest investment by carrying homeowners insurance. However, you may be unaware that your standard homeowners insurance policy does not cover damage from earthquakes. You may also be unaware of the risk level of earthquakes in your area of the country.

Of course, what you don't know may put your investment at risk. Interestingly, even in California, where earthquakes are common, only 12% of homeowners have earthquake insurance.

What Your Homeowners Insurance Policy Covers

Homeowners insurance usually covers some damage that results from earthquakes, such as fire and water damage due to burst gas and water pipes. Furthermore, damage to cars is usually covered under the comprehensive portion of your auto insurance.

However, your homeowners' policy does not cover the damage from an earthquake itself. Your homeowners insurance also does not cover floods, landslides, mud flows, or even tsunamis that may follow earthquakes. In order to be covered for those perils, you must have a special policy or an endorsement on your homeowners policy to cover your building and its contents.

Further, it is wise to check whether or not your earthquake insurance policy covers structures beyond the home itself, such as garages and swimming pools. You may also want to confirm that extra living expenses you may incur are covered should your home be destroyed.

Where You Live Matters

Assessing earthquake risk where you live is important. According to the Insurance Information Institute, 90% of the US population lives in seismically active areas. Consider the following information:

  • The most violent earthquakes have occurred in the central United States
  • The largest quake in the contiguous 48 states was in 1811-1812 along the New Madrid Fault in Missouri
  • The largest US quake happened in 1964 in Alaska
  • The Northridge, California earthquake of 1994 was the costliest
  • 39 states have suffered earthquakes since 1900, and all 50 states have been affected by the damages of earthquakes

Cost of Earthquake Insurance

Just as earthquake risk varies widely, rates for earthquake insurance can vary widely as well.

First, earthquake insurance premium rates are dependent upon the likelihood and potential severity of earthquakes in your area. However, the stability of the ground, and even the structure of your home itself are also factors. You should also keep in mind that older homes cost more to insure than new homes, and brick homes cost more to insure than wood homes.

Also, the quality of your home's construction and the infrastructure in your community can definitely impact the cost to repair damage. The recent earthquake in Haiti (January 2010) illustrates what can happen when buildings are poorly constructed.

Because earthquake insurance is catastrophic insurance, it can be quite expensive--especially in earthquake prone areas. In order to keep premiums low, most policies have high deductibles. You could see an earthquake insurance deductible anywhere from 2%-20% of your replacement coverage. For example, $100,000 damage could have a deductible as high as $20,000.

Good News About Earthquake Insurance

Most insurance companies offer earthquake insurance. In fact, California law requires that homeowners insurance policies offer this coverage. Enlist the help of a trusted professional to assess your risk and control your cost to protect the investment of your home.

Compare home insurance quotes from multiple insurance companies and choose the best policy for your needs.

Source :
Are there any disasters my property insuance won't cover? • • Insurance Information Institute http://www2.iii.org/index.cfm?instanceID=218854
Earthquakes: Risk and insurance issues • Jan 01, 2010 • • Insurance Information Insitute http://www.iii.org/Issue_Updates/Eathquakes-Risk-and-Insuance-Issues.html
Get the facts on earthquake insurance • Mar 07, 2008 • • MSN Money http://articles.moneycentral.msn.com/Insurance/InsureYourHome/GetTheFactsOnEarthquakeInsurance.aspx

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