Earthquakes can happen anywhere and at any time. If you don’t have earthquake insurance, you could be responsible for paying your losses out of pocket. standard homeowners insurance generally does not cover earthquake losses, and many insurance companies require an additional policy endorsement or rider for earthquake damage.
on March 18, 2020, salt lake city, utah suffered a magnitude 5.7 earthquake. Dubbed the 2020 Magna Earthquake, this disaster caused $629 million worth of losses to public and private buildings. Although earthquakes are relatively common in Utah, some residents may incorrectly assume that the damage is covered by their homeowners insurance. Experiencing an earthquake without proper coverage can be devastating. To avoid high out-of-pocket costs, learn more about earthquake insurance and how it can help you prepare for the unexpected.
Reading: Why is earthquake insurance so expensive
what is earthquake insurance?
Earthquake insurance is a policy or endorsement that covers direct damage from specific seismic events. the coverage will specify a period of time, usually 72 hours, thus constituting a single event. Earthquake insurance will cover damage to your home and possibly, depending on the details of your policy, other structures on your property, such as a detached garage or swimming pool. You’ll also be covered for personal property up to the limit you chose when you purchased the policy.
It’s important to know that your standard homeowners insurance policy does not cover earthquakes. The best thing you can do is cover damage from the fires that often follow earthquakes. Still, for damage from the seismic activity itself, you’ll need a rider or endorsement on your policy. If you live in an especially high-risk area, like California, you may need a separate earthquake insurance policy.
Emergency repairs needed to prevent major damage, necessary building code updates, and required ground stabilization are generally included in home earthquake insurance coverage. earthquake coverage also includes loss of use coverage for additional living expenses while your home is being repaired.
As mentioned above, fire damage from earthquakes will generally be covered under your standard homeowners policy. Earthquake policies won’t cover damage to your land, except where it supports your house or your vehicle, which should be covered if you have comprehensive auto insurance.
Do I need earthquake insurance?
In most cases, lenders do not require earthquake insurance like homeowners insurance does. however, that doesn’t mean you shouldn’t have it. According to the National Association of Insurance Commissioners (NAIC), Americans in 84 percent of states are at risk from an earthquake. that means, for most of us, a risk assessment is essential.
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a study conducted by the us. the geological survey found that the following five states are at higher risk of experiencing an earthquake:
- the proximity of your home to an earthquake zone
- the age of your house
- your foundation and type of construction (masonry will be more expensive to insure)
- the deductible you choose
- the cost of rebuilding your home
- any additional coverage (such as secondary structures)
Does homeowners insurance cover earthquake damage?
why are earthquake deductibles so high?
do you need earthquake insurance if you don’t live on a fault line?
does my earthquake insurance cover flooding?
Although many Americans could benefit from extra earthquake protection, people in these five states in particular should consider purchasing an earthquake endorsement or policy to bolster themselves against what could be a significant financial loss.
The table below shows the earthquakes of magnitude 5.0 and larger recorded around the world between 2016 and 2021. While the total number of earthquakes varies, there were significantly more earthquakes in 2021 than in previous years. these numbers may return to baseline, but this data could indicate more seismic activity in the future. earthquake insurance may be more important now than ever.
earthquakes recorded worldwide (magnitude 5.0 or greater), 2016-2021
source: usa. uu. geological survey, “earthquake hazard lists, maps and statistics”
To understand your risk, combine historical data with predictive maps and expert assessments. when it comes to earthquakes, past performance is not necessarily a good predictor of the future. Some states like California are known to have a high active risk of earthquakes. even states like texas and oklahoma see more fracking activity, so risk levels are increasing in those areas.
understand fees and deductibles
The rate you pay for earthquake insurance is determined by your insurance company using specific data about your home and location, including the likelihood of earthquake damage. the naic cites rating factors including the following:
As with your standard policy, your coverage must cover the full cost of rebuilding your home, also known as replacement cost coverage. this is different from the sale or appraised value of your home. takes into account the costs of building materials and labor if your home were to need a complete rebuild.
See also: Is Florida a No-Fault State? | Bogin, Munns & Munns
the risk of an earthquake will have the greatest influence on your premium. for example, a missouri resident of new madrid county, located right on a major fault, would pay 328% more than a resident of jackson county, missouri, where kansas city is located, far from the fault line new madrid.
Your deductible also plays a role in your rate, more so than with a traditional homeowners policy. Your standard policy has a predetermined deductible that can range from as little as $250 to several thousand dollars. But most earthquake insurance deductibles are listed as a percentage of the cost of rebuilding, typically between 10% and 15% of the home’s total rebuilt value, so on a policy with $300,000 in home coverage , you may face a deductible of up to $45,000.
If your home isn’t damaged enough for a complete rebuild, you could be responsible for the full cost of the repair, even with insurance. and that’s just in the house itself; you should also consider your personal property and the protection in any other structures.
how much does earthquake insurance cost?
The cost of earthquake insurance varies widely, depending on your location and other factors. As you can imagine, the closer you are to a significant fault or fracking site, the higher your premium. this means that homeowners in lower risk areas will pay significantly less than homeowners in high risk areas.
If you live in California, which has frequent earthquakes, the California Earthquake Authority has resources to help you determine how much earthquake insurance costs, including an earthquake premium calculator.
Is earthquake insurance worth it?
Not everyone needs earthquake insurance. In some areas of the United States, the risk of an earthquake or volcanic event is almost non-existent. Paying even a low annual premium, compared to your coverage limitations and significant deductible, may not be worth it.
but many americans live in high or moderate risk areas, and those areas are increasing as fracking becomes more common in areas like oklahoma. all it takes is one major event in these areas to cause major or even catastrophic damage to your home. Consider how much it would cost to replace your home in the event of an earthquake. could you afford it? Also, could you absorb temporary housing costs or potential damage to your personal property? Your premium price may be high if you live in a high-risk area, but it won’t be higher than your replacement costs.
To find out if earthquake insurance is worth it to you, weigh those costs and get a thorough underwriting.
See also: How to prove to insurance damage is from lightning – Landau Law Group