Earthquake insurance is a type of property insurance that covers damage to policyholders' property in the event of an earthquake. Most importantly, homeowners insurance policies generally do not cover earthquake damage. Despite the fact that 90% of Americans live in seismically active areas, only a small amount of people purchase earthquake insurance.
Even in California, only 12 percent of homeowners have earthquake insurance.
Since 1996, the amount of people who have earthquake insurance in California has dropped by 18 percent. The number of people without earthquake insurance grows each year, as people believe the policies are too expensive for such a small amount of coverage.
The U.S. Geological Survey states that there is a 70 percent chance that an earthquake of 6.7 magnitude or larger will hit the San Francisco Bay area within the next 30 years. According to the Earthquake Education Center at Charleston Southern University, there is a 40 to 60 percent probability that a major earthquake will occur in the eastern U.S. area within the next 20 years.
The Insurance Information Institute has also stated that the New Madrid Fault, which runs through Arkansas, Kentucky, Missouri, and Tennessee, has a 40 to 63 percent chance of causing a 6.0 magnitude earthquake within 15 years. At one point, the New Madrid area suffered an earthquake powerful enough to change the course of the Mississippi river.
Most earthquake insurance covers the cost of replacing or repairing damaged property caused by an earthquake. When choosing a plan, insurance buyers should consider if the policy:
- Includes accessories along with the dwelling, such as garages
- Pays for the contents of the home and living expenses if the home is too
damaged to live in
- Has any exclusions or limitations to the coverage
- Requires a deductible to be paid before the insurance kicks in
- Has a long enough time limit to file claims after an earthquake occurs
There are a number of factors that each insurance company looks at to determine their rates. Because homeowner, condo, and rental insurance policies do not cover earthquake damage, coverage must be purchased as a separate policy or as an endorsement. Areas are graded on a 1 to 5 scale for likelihood of earthquakes, which insurance companies often reflect in their rates.
Most policies carry a high deductible because earthquake insurance is a type of catastrophic coverage.
The California Earthquake Authority is a state-sponsored privately funded, publicly managed agency that offers earthquake insurance with a 15 or 10 percent deductible. The CEA is not backed up by the state of California in the event of a major earthquake draining all CEA funds.
The amount of earthquake insurance one should purchase should not be based on the market value of the property, but on the cost of replacement or reconstruction.
California Home Insurance
You may be eligible to get a California home insurance discount for:
- Having a burglar alarm
- Having a newer home
- Being claim free in the past
- Getting your car insurance with the same company
- Senior citizen discount (55+)
- Full sprinkler building discount
- Gated community discount
Call 1-866-909-0777 for details and to get your FREE quote!
Shana Insurance Services offers affordable rates and provides prompt services, reliability, convenience and financial stability. This exceptional balance of value, strength and service sets Shana apart from other California insurance agencies.
