Earthquakes are a fact of life in California. They will happen, but nobody knows precisely when.
What is known is that earthquakes can cause a lot of damage to California homes and the owner’s belongings.
In some cases, after an earthquake, a person may have to move out of their home while it is repaired or rebuilt.
One common misconception is that regular homeowners’ insurance will pay for damage done by earthquakes.
However, this is not true.
Homeowners, renters, and condominium insurance policies do not cover most damage from natural disasters that include earthquakes, floods, and landslides.
Are You Really At Risk of an Earthquake?
The first thing you need to understand when considering purchasing earthquake insurance is what the real risks are for you where you live.
According to the U.S. Geological Survey, the U.S. has about 20,000 earthquakes a year, and properties in as many as 42 states are considered at-risk.
According to the California Earthquake Authority, there is a 75% probability of one or more earthquakes with a magnitude 7.0 or greater striking Southern California over a 30-year period, beginning in 2014.
So if you don’t have earthquake insurance yet and you live in California, you’re probably wondering if it is worth paying for.
Is Earthquake Insurance Worth Getting?
It may surprise you to know that even only 10 percent of Californians purchase earthquake insurance. This means that over 90 percent of Californian homeowners and renters are not covered for damage done by earthquakes.
Earthquakes tend to cause extensive damage to the foundation, siding, and roof of residential homes. This is especially true for homes built before 1980 on a raised foundation if they are not retrofitted.
By not having earthquake insurance, you place yourself at risk of losing everything or sustaining damages to your property that you can not afford to repair if an earthquake damages your home.
If you have a mortgage, this damage can cost a lot of money because mortgage companies still require mortgage payments even if your home is destroyed by an earthquake.
The Benefits of Earthquake Insurance
If an earthquake damages your home, you will be covered for repairs or reconstruction rather than losing everything. The insurance will remove the need to borrow money to make your home livable.
In some lower-risk areas, the cost of earthquake insurance is lower. However, it is always worth getting a quote so you can make an informed decision.
You may also consider offsetting the cost by taking a higher deductible to save money on your home insurance costs.
If your home is uninhabitable due to an earthquake, you may get additional living expenses to live elsewhere while the insurance company pays to rebuilds your home.
Therefore if you are still paying your mortgage for your destroyed home, at least someone else is paying for a place for you to live. Imagine having to pay your mortgage for a house that no longer exists and will not be rebuilt, plus your accommodations while you get yourself back in shape. Insurance is always good to have when a major disaster strikes.
The Drawbacks of Earthquake Insurance
In some states, mainly those with the highest risks, earthquake insurance can be costly.
If you live in a higher risk area, you will have to decide between paying the high price of earthquake insurance or taking the risk that an earthquake could destroy your home.
Even if you have earthquake insurance, you could still have a high deductible to pay, depending upon the policy you choose. The deductible can range anywhere from $1,000 up to $10,000 or possibly more. In most cases, the cost is relative to the deductible on your standard home insurance policy.
The deductible for earthquake insurance is often a percentage of the coverage on the building amount, usually 5-10% of the total building insured value.
How to Decide on Earthquake Insurance
Determining if you need earthquake insurance is more important than ever.
If you are thinking about buying a home in an earthquake-prone location, it’s advisable to look into the cost of earthquake insurance coverage to understand the true cost.
Some questions to answer about whether you need earthquake insurance:
- Can you afford the cost of repair or a rebuild if your home is damaged?
- Can you replace your personal belongings if they are damaged?
- Can you afford to pay for temporary housing if structural damage makes your home uninhabitable while getting repaired?
Keep in mind that in general, your homeowners or renters insurance does not protect your house from the damage an earthquake causes, even if the damage is indirect. On the other hand, some homeowners or renters insurance may cover direct loss due to explosion, theft, or breaking glass caused by an earthquake, even if you do not have earthquake insurance.
Because in California the risk for earthquake damage is significant, the not-for-profit California Earthquake Authority (CEA) offers affordable coverage for the structure of the house, building code upgrades, and emergency repairs.
They also offer separate coverage options for belongings (with a separate, lower deductible) and additional living expenses (with no deductible).
If you need more help to find out whether earthquake insurance is available in your area, we are here to help. Jackson & Jackson Insurance Agents and Brokers offer homeowners insurance and earthquake insurance with over 80 years of experience serving the San Dimas, Glendora, and LaVerne communities.
If you have questions about policies or need to look at extra insurance coverage, we’ll bring you a choice of insurance providers based on your needs, to see what works best for you.