Americans are at Risk for Earthquake Damage

24 Sep

According to a recent report from the United States Geological Survey, roughly half of all Americans are at risk for earthquake damage. The data shows that 143 million Americans live and work in areas that have at least some potential for earthquake shaking that could possibly damage houses and buildings. This breaks down to 57 million people living in areas with a moderate chance of shaking while a whopping 28 million people live in areas that have a high potential for shaking damage.

Recent earthquakes in New Jersey (a 3.1 on the richer scale), California, Alabama, North Carolina, and Texas show just how widespread the risk of earthquakes is in the United States.

The bad news is that earthquake damage is almost always excluded from a standard homeowner, condo and renters insurance policy. If you want to be protected from earthquake damage you will need to purchase a separate earthquake policy or add an earthquake endorsement to your current policy. 

Here is what you need to know about earthquake insurance.

What is Covered by Earthquake Insurance?

The majority of earthquake policies offer the following coverages but always read your policy in full as there can be differences between policies:

  • Dwelling coverage: This portion of the policy protects your home and structures attached to it such as a garage. It also protects your foundation if it is damaged. 
  • Other structures on your property: This covers other structures on your property that are not attached to your home. This may include things such as carports, barns, sheds, and any other structures. 
  • Personal property: Your personal property is also covered from earthquake damage. This include things such as appliances, pots and pans, clothes, furniture and any other personal property. Some policies do have coverage caps on certain items such as tools or computer. In these cases, the coverage for those items may be limited to $500. 
  • Additional living expenses: This coverage will help cover expenses you incur if you are not able to live in your house due to damage caused by an earthquake. This can be used for things such as hotels, restaurant meals and even dry cleaning. 

What’s is excluded from earthquake insurance?

Exclusions vary by insurer but here are a few common exclusions on earthquake insurance policies:

  • Water supply systems: This includes things such as wells, irrigation systems and sprinkler systems 
  • Underground structures: This doesn’t mean your secret underground bunker, it is referring to items such as underground pipes, cables, flues and drainage systems
  • Retaining walls, piers and wharves 
  • Exterior walls and fences
  • Satellite dishes and antennas
  • Awnings, pergolas and other patio coverings
  • Landscaping
  • Trailers 
  • Swimming pools and hot tubs
  • Motor vehicles
  • Aircraft
  • Watercraft

It is possible to purchase a policy that covers many of these common exclusions, but you will pay a bit more for that type of policy. It is a good idea to shop a number of different policies and compare exclusions.

Other issues that Not Covered by Earthquake Insurance

There are policies that will exclude specific problems that may occur before, during or even after an earthquake. Problems such as:

  • Fires: An earthquake can cause gas line ruptures that can lead to fires. Fire damage may be excluded from an earthquake policy. In most cases, your homeowners insurance would cover fire damage. 
  • Earth movement from a non-seismic event: Property damage due to earth movement that is not related to an earthquake would not be covered. This can include the ground sinking, rising, expanding or contracting.
  • Water damage:  Damage that is caused by flooding or water damage related to sewer or drain backup is not covered by a standard earthquake policy.
  • Explosion: Damaged caused by explosions would be excluded
  • Intentional damage: If damage or loss is caused by theft, burglary, looting, or vandalism before, during or after the earthquake it would not be covered. This may be covered by your homeowners policy. 

California Earthquake Insurance

California experiences an earthquake roughly every three minutes. According to a study published in Science, researchers looked at seismic data between 2008 and 2017 and found that Southern California was hit with a whopping 1.81 million earthquakes over that time which translates into an earthquake every three minutes.

In California, the law requires that insurance companies offer earthquake coverage to you when you purchase a homeowners policy and every year at renewal. This offer must be in writing and detail the policy limits, premium and deductible. Once you receive the offer you have 30 days to accept it, but you are not required to accept the policy.

In the Golden State, the California Earthquake Authority (CEA) is the provider of most residential earthquake insurance policies, roughly 65 percent. You can purchase coverage directly from the CEA or from a private insurance company that is a member of the CEA. 

You must have a residential homeowners insurance policy in order to buy a CEA policy and you are required to purchase a CEA policy from the same insurer that issued your homeowners policy.

In California, homeowners insurance must cover any fire damage that follows an earthquake. 

How expensive is earthquake insurance?

The cost of earthquake insurance can vary dramatically and will depend on a variety of factors:

Location of home: This one is pretty obvious, if your home is located in a high-risk area for earthquakes, you will certainly be paying more for coverage. In states such as Alaska, California, Oregon and Washington where earthquakes are common, expect to pay around $800 a year for coverage while in less risky locations, earthquake insurance may only cost $100 to $300 a year. 

Age of your house: Older houses tend to be more expensive to repair or rebuild which makes them more expensive to insure. 

Cost to rebuild your home: All insurers take into account the cost to rebuild your home when setting a premium. If your home is filled with expensive features and materials, you can expect to pay more for earthquake insurance. 

Deductible you choose: Earthquake insurance typically comes with a percentage deductible. This means that your deductible when you file a claim is a percentage of your total dwelling coverage. Earthquake deductibles typically range from 10 to 25 percent. As an example, if you are carrying $300,000 in coverage with a 15 percent deductible, you will be on the hook for $45,000 if you have to file a claim. 

Should I Carry Earthquake Insurance?

Only you can answer this question. Earthquake insurance is rarely required by a lender or HOA but if you live in an earthquake prone area it can be a financial lifesaver if your home is damaged or destroyed by an earthquake.

The following 10 states have the “strongest shaking potential, according to the United States Geological Survey:

Despite the fact that these states are more likely to have an earthquake, it is possible to experience an earthquake in all 50 states. For earthquake insurance quotes, please give us a call at 855-980-6963. We look forward to helping you!

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