Despite the fact that many states are earthquake-prone, a quake can happen anywhere in the nation at any moment. Despite this likelihood, a conventional homeowner’s insurance policy frequently excludes coverage for harm brought on by earth movement. You may want to think about getting an earthquake rider or special policy endorsement to make sure your investment is adequately insured in case of an earthquake loss. Without the additional insurance, sustaining such a loss may put homeowners in financial ruin and unable to fix or rebuild their homes. Bankrate’s team of experts lays down earthquake insurance and how it can help you be ready for the unexpected to help you avoid hefty out-of-pocket expenses.
What is insurance for earthquakes?
A policy or endorsement known as earthquake insurance covers direct damage caused by particular seismic events. The coverage will outline the time frame—typically 72 hours—for what counts as one occurrence. Depending on the details of your policy, earthquake insurance may also cover damage to other structures on your property, such as a detached garage or swimming pool. Additionally, you’ll be protected for personal items up to the insurance maximum you selected.
It’s crucial to understand that earthquakes aren’t covered by your typical homeowners insurance policy. The best it can do is pay for the damage brought on by the flames that often follow earthquakes. You will need an additional rider, or endorsement, on your policy to cover damage brought on by the earthquake activity itself. You could want a different earthquake insurance policy if you reside in a very high-risk region, such as California.
Home insurance policies for earthquakes frequently cover urgent repairs required to stop more damage, essential alterations to meet building code requirements, and necessary site stabilization. Loss of use insurance for additional housing costs while your home is being repaired is also covered by earthquake insurance.
As was previously noted, your typical homeowner’s policy will typically cover fire damage brought on by earthquakes. The only areas of your land that earthquake policies will cover are those that support your home and your car, which should be covered if you have comprehensive auto insurance.
What Is Covered by Earthquake Insurance?
Normal earthquake insurance includes:
Dwelling: Your home and any related structures that have been directly or indirectly harmed by an earthquake can be repaired with the help of earthquake insurance. As an example of direct damage, an earthquake could shift the foundation of your house. As an example of indirect damage, a tree falling during an earthquake could harm your roof. Anyhow, you’re protected.
Personal property: Personal items in the home are commonly harmed by earthquakes. Your compensation under an earthquake insurance policy will be determined by the cost of the objects you lost or had damaged.
Living costs: An earthquake insurance policy can assist cover the cost of your additional living expenditures, such as accommodation, food, and transportation, if earthquake damage renders your home temporarily uninhabitable.
Your home and any lost or damaged personal belongings are both covered by earthquake insurance. In the event that you have to leave your house due to severe earthquake damage, it may also cover your living expenses. However, the coverage does not begin until your deductible has been met.
Damage from earthquakes that is not covered
What your earthquake insurance does not cover is broken down below, along with solutions:
Fire damage: Damage from fires triggered by earthquakes is not covered by earthquake insurance. Even if the fire was started by an earthquake, standard homeowners insurance and renters insurance cover fire damage.
Flood damage: Floods frequently occur in conjunction with earthquakes, but flood damage to your home is not covered by earthquake insurance. In fact, flood damage isn’t even covered by a typical homeowners insurance policy. To be protected from flood damage, you must have a separate flood insurance policy.
Vehicle damage: Personal belongings lost or damaged due to an earthquake are covered by earthquake insurance, but vehicles are not. If an earthquake damages your car, you must submit a claim to your auto insurance company.
Sinkholes: Earthquakes can result in sinkholes, however damage from sinkholes is typically not covered by earthquake insurance plans. Fortunately, you may add a land repair rider (a supplement) to your homeowners or earthquake insurance policy to protect against sinkholes.
Is earthquake insurance necessary?
Unlike homeowner’s insurance, lenders often do not demand earthquake insurance. However, that does not imply you cannot have it. Americans in 84 percent of states, according to the National Association of Insurance Commissioners (NAIC), are at danger of suffering an earthquake. This implies that a risk assessment is critical for the majority of us.
In the United States, there are often up to 16 earthquakes with a magnitude of 7.0 or higher per year. The fallout might result in high repair and replacement expenses for buildings. Property losses from the March 18, 2020, Salt Lake City, Utah, Magna Quake were $629 million for both private and public sectors.
According to a research by the U.S. Geological Survey, the following five states have the highest earthquake risk:
- Arkansas California
Although many Americans could benefit from more earthquake protection, residents of these five states should give earthquake endorsements or policies serious consideration in order to protect themselves against what could be a large financial loss.
The table below lists all earthquakes with a magnitude of 5.0 or higher that were felt worldwide between 2016 and 2021. Even if the overall number of earthquakes varies, there were a lot more of them in 2021 than in previous years. These figures might return to their baseline levels, but this information might point to future increases in earthquake activity. The need for earthquake insurance may be greater than ever.
Recognize the deductibles and rates
Your insurance provider uses particular information about your home and neighborhood, such as the potential of earthquake damage, to calculate the cost of your earthquake insurance. The NAIC lists the following as rating considerations:
- The closeness of a seismic zone to your house
- Age of your house
- Your foundation and kind of construction (masonry construction will cost more to insure)
- The deductible that you select
- The price of rebuilding your house
- Any more protection, such as secondary structures
Your coverage, sometimes referred to as replacement cost coverage, should cover the full rebuilding cost of your home, just like with your normal policy. This is not the same as the sale or appraisal value of your house. It takes into account the price of building supplies and labor if your house needs to be completely rebuilt.
The largest factor affecting your premium will be the earthquake risk level. For instance, an individual living in Missouri’s New Madrid County—which lies directly on a major fault—would typically pay substantially more for quake insurance than would an individual living in Jackson County, which is home to Kansas City and is located outside of the New Madrid fault line.
In comparison to a standard homeowners policy, your deductible has a bigger impact on your rate. The preset deductible on your typical coverage may be as low as $250 or as high as several thousand dollars. On a policy with $300,000 in dwelling coverage, you might have a deductible as high as $45,000 because the majority of earthquake insurance deductibles are expressed as a percentage of the rebuild cost, typically between 10% and 15% of the total rebuild value of the home.
Even with insurance, you can still be liable for the full cost of the house’s repairs if your house sustains insufficient damage to warrant a complete rebuild. You should also think about coverage for any other structures as well as your personal property.
What is the price of earthquake insurance?
The price of earthquake insurance varies substantially based on where you live and other aspects. As one may expect, your premium will increase the closer you are to a large fault or fracking site. Homeowners in low-risk areas will normally pay substantially less than those in high-risk ones, according to this.
Does earthquake insurance have any value?
Some people may not require earthquake insurance. The likelihood of an earthquake or volcanic event is essentially nonexistent in various parts of the United States. Even a little yearly payment may not be worthwhile in light of the restrictions on your coverage and the hefty deductible.
However, a large portion of Americans reside in high- or moderate-risk areas, and these areas are expanding as fracking becomes more prevalent in places like Oklahoma. One significant incident in these regions is all that is necessary to seriously harm or even completely destroy your home. Think about the price you would pay to rebuild your house in the event of an earthquake. Are you able to afford it? Furthermore, could you afford the costs of a temporary home or any property damage? If you reside in a high-risk location, the cost of your premiums may be high, but they most likely won’t be greater than the cost of replacement.
Weigh the expenses and get a detailed risk assessment to determine whether earthquake insurance is worthwhile for you.