If you have homeowners’ insurance to protect your house, you might think you have all the coverage you need. However, this isn’t always true. Homeowners’ insurance may provide protection against many common risks, but some risks may be excluded. Flood insurance and earthquake coverage are typically excluded from home insurance policies, so coverage must be purchased separately. When deciding whether you should purchase coverage, there are a few things to consider.
How is homeowners’ insurance earthquake coverage provided?
Earthquake insurance policies are typically excluded from standard homeowners’ insurance policies. It is also commonly excluded from standard condo and renters’ insurance policies. For example, a fire that occurs following an earthquake may be covered, but the losses from the earthquake itself might not be.
To purchase earthquake insurance, you have two main options: purchasing a standalone policy that is separate from your existing home insurance policy or purchasing an endorsement that adds earthquake coverage to your home insurance policy.
What does earthquake insurance cover?
When an earthquake strikes, it can cause and produce devastating losses. According to the Insurance Information Institute, a California earthquake that occurred in 1994 caused $44 billion in losses and $15.3 billion in insured losses.
Earthquake insurance can provide coverage for three types of expenses, up to the policy’s limits and according to the terms of the policy:
- Structural damage. Earthquake insurance can provide coverage for structural damage caused by an earthquake, which could be significant and include damage to the foundation. According to Home Advisor, foundation damage caused by an earthquake can easily cost $5,000 to $10,000 to repair, and homeowners without insurance may pay more than $30,000.
- Personal property. Earthquake insurance may also provide coverage for personal property that is damaged or destroyed in an earthquake.
- Additional living expenses. After an earthquake, your home might not be safe to live in until repairs are completed. This may be due to structural damage or other threats caused by the earthquake. Additional living expenses coverage can pay for hotel stays and related expenses until you can return to your home.
Where are earthquakes a threat?
How likely an earthquake is to occur will depend largely on where you live. Most people know that California experiences earthquakes frequently – the U.S. Geological Survey (USGS) says that Southern California alone experiences about 10,000 earthquakes each year.
Earthquakes can be possible outside of high activity areas or in places where drilling is common, as drilling activity may trigger or strengthen earthquakes. As a result, areas that used to have minimal earthquake risk may now face a greater threat. Scientific American states that earthquakes have skyrocketed in Oklahoma and Texas since 2008 and the cause appears to be wastewater from oil and gas drilling operations.
Do you need earthquake insurance coverage?
As we’ve seen, some areas, like California, are prone to earthquake activity, making earthquake insurance a smart coverage option. If you live in an area with high seismic activity, your mortgage provider may even require earthquake insurance.
Other places have a lower risk. Although this means that you are less likely to experience an earthquake-related loss, it also means that you’ll probably receive lower rates for earthquake insurance. Earthquakes can occur in low-frequency areas, so this might still be a sound investment.
When deciding if you should purchase earthquake insurance, ask yourself the following questions:
- What is the earthquake risk in your area? You may need to do some research to determine how close you are to a fault line.
- How expensive is earthquake insurance? Don’t just assume coverage is too expensive. Cost-effective earthquake insurance may be available, so work with your insurance broker to see if adding this coverage makes sense for your situation.
- Could you afford repairs and living expenses without earthquake insurance? If not, purchasing insurance to cover earthquake damage is likely a good investment.
Protect Your Home with Earthquake Insurance
One of Higginbotham’s home insurance brokers can help you compare the options available and help you to select the best earthquake insurance policy for your situation. Contact us to learn more.
