The Advantages and Disadvantages of Purchasing Earthquake Insurance

The Advantages and Disadvantages of Purchasing Earthquake Insurance

The image includes a residence with a fracture in the side, an infrared map of earthquake hotspots in the United States, and a cracked highway somewhere in the southwest. The text says: “Information about earthquake insurance The price of earthquake insurance depends on where you live; homes and other personal property in more than 40 states are susceptible to earthquake damage; homeowners’ insurance includes earthquake coverage; earthquake insurance must be purchased separately or added to your policy by endorsement. “

Damage from earthquakes is not covered by a typical homeowner’s insurance policy. You might or might not need to be concerned about earthquake insurance depending on the state in which you reside. According to the Insurance Information Institute, quake damage to homes or personal property could affect millions of individuals in 42 states. 

You might be surprised to learn that, despite a high level of awareness of the risk of earthquakes, just 10% of Californians buy earthquake insurance, according to the California Earthquake Authority.

So you’re not alone if you don’t already have it and are debating whether it’s worth the money.

Discover the truth about earthquakes, the risks they actually pose, and the advantages and disadvantages of purchasing earthquake damage insurance.

Do You Really Face an Earthquake Risk?

When considering buying earthquake insurance, it’s important to understand the actual dangers associated with your area. The data you need to learn more is available from the U.S. Geological Survey.

The U.S. Geological Survey estimates that there are roughly 20,000 earthquakes every year in the country. The majority of individuals are unaware that they may be in an earthquake-prone area. 42 of the 50 states are at risk. 

Which Regions Are Most Prone to Earthquake Damage?

The USGS websites show a map of the known earthquake zones. The most active regions are along coastlines and in mountain ranges, although this does not imply that there are no faults nearby. There may be other undiscovered faultlines spread throughout the United According to the USGS, faults can take thousands or tens of thousands of years to return to an active state.

There is no method to predict if an earthquake will occur in areas where there hasn’t been seismic activity in the past because the records only reflect known earthquakes and areas mapped by contemporary sensors.

The Insurance Information Institute provides information on the actual hazards present in each U.S. location to aid in your decision. You can learn more about the dangers in Central, Eastern, or Western America at their websites. You can analyze your risk using the information from a Federal Emergency Management Agency (FEMA) research report, which also offers some useful insights. 

The Benefits of Covering Earthquakes

The main benefit of purchasing earthquake insurance is that, in the event that a quake damages your property, it will cover the money you have invested in it.

Without insurance to cover the costs, you might have to continue paying your mortgage and find a new place to live out of pocket if you sustain earthquake damage. Your debts, including your mortgage, won’t go away; they’ll only increase.

Instead of losing everything or incurring more debt to make your home inhabitable, you will be insured for repairs or rebuilding if an earthquake damages your property.

You won’t be paying as much as folks do in high-risk zones because costs are lower there. Obtaining a quote is usually worthwhile, so you may decide with confidence. If you discover that earthquake insurance only costs $20 a month, you may decide that the peace of mind it can provide is worth the cost. You might also consider raising your deductible to lower your monthly costs.

If you can’t live in your house after an earthquake, you may be eligible for additional living expenses while your house is being rebuilt. Even if you are still paying the mortgage on that house, at least you are not paying for housing. If you also had to pay for housing while your new home—for which you took out a loan—was being built, your expenses might triple.

Buying earthquake insurance has drawbacks.

Aside from issues with cost and price, earthquake insurance does not have many drawbacks.

In states with more risk, the price might increase. Based on the level of risk, you must evaluate if you can afford to pay for earthquake damage out of pocket or if you need insurance assistance.

In addition to the deductible on your standard house insurance policy, you will also have a large deductible to pay. A common earthquake insurance deductible is a percentage of the building’s coverage, such as 5% of the home’s value. 

Current Trends That Stress the Importance of Purchasing Earthquake Insurance

No longer do you have to live next to or directly on a fault line to experience earthquakes or sustain damage. Modern disposal techniques may be to blame.

A 5.8-magnitude earthquake struck Oklahoma in 2016. It’s possible that human activities, such as the injection of sewage water into deep wells, caused this earthquake. Fracking is responsible for one to two percent of all earthquakes caused by humans; the remainder are caused by waste water injection.

Living in an area with mining or fracking may put you at higher risk for earthquakes than in the past. To obtain a quote for earthquake insurance, speak with your insurance representative. This will enable you to assess whether adding a few extra dollars to your budget is worthwhile.

What Sorts of Damage Are Caused by Earthquakes?

In addition to being rocked to pieces, an earthquake can harm your house in a variety of other ways. Your policy’s earthquake coverage may include the following items:

  • Full or partial damage.
  • Collapse
  • There are structural flaws that demand correction because they put people in danger.
  • Damage to the landscape and other property
  • Explosions
  • Fires
  • Fuel Leaks
  • Avalanche/landslide damage
  • Water and flood damage
  • The Costs of Earthquake Insurance and Their Future

The basis for insurance is the insurer’s capacity to cover losses and accrue sufficient funds to fund arising claims. The cost of earthquake insurance is higher because fewer people are purchasing it, which results in a lower amount of money being collected overall.

The cost of the insurance would go down if more individuals bought it. There are typically long stretches without disasters, allowing the businesses to gather enough money to cover their expenses and repair damages.

Evaluating the Benefits and Drawbacks of Earthquake Insurance

Whether or not purchasing earthquake insurance is worthwhile is entirely up to you. It is challenging to foresee when an earthquake may happen. Despite extended periods of low activity in some areas, it just takes one significant incident to harm or destroy your property.

The purpose of this insurance is to safeguard the cash you’ve put into your house. Without it, you run the danger of sustaining house damage and losing possessions that you cannot afford to replace or restore.

If you have a mortgage, you could wind up paying even more because your mortgage company will still expect payment even if an earthquake destroys your property. The value that your house has accumulated over the years is lost if it is paid off, and there is no way to make up the difference.

Finding out more information is the best course of action. Visit the Earthquake Hazards Program website to review the U.S. Geological Survey’s official data regarding the area where you reside. This software provides information about your state and provides a list of resources you may use to determine whether you should insure your property against earthquakes. 

Questions and Answers (FAQs)

What is the cost of earthquake insurance?

There are too many factors influencing insurance prices to provide a single average that all homeowners might reasonably anticipate paying. Instead, think about the things that insurers will take into account. Older homes, for instance, cost more to insure, and places vulnerable to earthquakes will cost more to cover. You can control these costs by changing your deductible and coverage amounts.

If you don’t have earthquake insurance, what happens?

Without earthquake insurance, you run the danger of incurring a significant monetary obligation. If you’re fortunate enough to stay out of an earthquake, you won’t suffer any consequences for not having insurance. If an earthquake does occur, though, you might not receive any assistance in rebuilding. You will need to find another place to live if an earthquake destroys your home, and an insurer won’t be able to provide any financial assistance.

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