What Is Earthquake Insurance?

Did you know every state is at some risk for an earthquake?

Although most earthquakes in the United States are small and don’t cause damage, they can be catastrophic. So it’s important to consider your unique risks, like where you live, in determining whether earthquake insurance is right for you.

The risks

Earthquakes may not have made the news in your area recently, but don’t let this lull you into a false sense of security. It’s better to investigate your risk to make a more informed decision about your need for coverage. For example, did you know Missouri is the third-largest market for earthquake insurance among the states, exceeded only by California and Washington?

To help assess earthquake risks, the U.S. Geological Survey has created National Seismic Hazard Maps.These maps show how often scientists expect damaging earthquakes in various parts of the country.

According to the website, all 50 states are at risk for earthquakes. But the risk is greatest in the following states: Alaska, Arkansas, California, Hawaii, Idaho, Illinois, Kentucky, Missouri, Montana, Nevada, Oregon,South Carolina, Tennessee, Utah, Washington and Wyoming. The states with the lowest risk are Florida,Iowa, Minnesota, North Dakota and Wisconsin.

While the hazard maps indicate the potential for damaging tremors, the extent of the damage could vary by region. A small earthquake concentrated in a small area without stringent earthquake building codes could cause more damage than a large earthquake spread over a large, mostly unpopulated area.

Buying a policy

Most homeowners insurance policies do not cover earthquake damage. If earthquake coverage is not included in yours, it may be time to add it.

Most private insurers can add earthquake coverage as an extension to your existing homeowners policy or as a separate, stand-alone policy. If your primary insurance company does not offer it, you can get it through a different private insurer. Your agent can help you with this.

Policy basics

It’s useful to understand the basics of earthquake insurance when comparing policies.

Earthquake insurance is optional, and there are three parts to earthquake coverage: 

  1. Dwelling coverage to insure damage to your home 
  2. Personal property protection for your belongings 
  3. Additional living expenses to cover costs incurred if you have to reside elsewhere while your home is being repaired

If you rent, you obviously don’t need dwelling coverage, but you can still purchase earthquake insurance to pay for your belongings or the cost of living elsewhere during repairs.

If you own a condominium, you may need coverage to pay for any repair assessments required by your condo association. The association can provide this information to share with your insurance professional.

Mobile homes can be protected with dwelling coverage.

Rates vary

Earthquake insurance rates can vary significantly, depending on the risk in your geographic area. Cost is largely determined by hazard maps but can also be influenced by:

  • Local building codes
  • The age of your home
  • The number of stories (Taller homes are more likely to tumble.)
  • How your home is framed (Wood is more flexible and better able to withstand tremors.)
  • The type of soil around your home (Sandy soil absorbs more movement than clay or rock.)
  • The kind of foundation (Raised foundations offer more flexibility.)

If you’re in a high-risk area, you can retrofit your home to be more earthquake resistant, which may also reduce your insurance premium. Your insurance professional can offer ideas for reducing your risk of loss, which may include bolting your home to the foundation, bracing the chimney, installing automatic gas shut-off valves and strengthening walls with plywood.

Earthquake insurance should cover your dwelling up to the same limit as the coverage on your homeowners policy. However, the deductibles on earthquake policies are typically higher than those on homeowners policies. The general rule is 5% to 15% of the policy limit, but it could be higher.

Factor exclusions into your decision-making process

Earthquake policies often carry exclusions. Be sure to consider this when comparing different options. Common exclusions are vehicles, collectibles, harm to land (think sinkholes and erosion) and damage to soft- and hardscaping, such as pools and fences.

Some policies provide options for “engineering cost,” which would extend coverage to a greater portion of your losses. Of course, your insurance professional can clarify any exclusions, help you evaluate your specific property exposures, and add coverage as appropriate.

Another major exclusion is water damage. Earthquakes commonly cause flooding and tsunamis. You’ll need flood insurance to cover these events. You may also want to consider the risk of sewer and drain backups and confirm you have protection for these.

Most standard earthquake policies do cover losses from resulting fires, but verify with your insurance agent that this is true for the policy you select.

Figure out how close you are to a fault line

Earthquake insurance outside the highest-risk areas is affordable. It can help with expensive costs, such as foundation repairs, if your property is damaged by an earthquake.

It’s worth checking the U.S. Geological Survey maps to see how close you are to a fault line and then asking your insurance agent about the price of adding earthquake coverage to your homeowners or condo policy.

Not sure if you need earthquake insurance?

Our team can help you understand your current coverages and if you need additional. Reach out to our Personal Insurance team.

This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.

Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.

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