What does earthquake insurance cover and why should you consider getting it?

January 4, 2017

Why do I need earthquake insurance?

If there is an earthquake that destroys my home I’ll be okay because I have homeowners or renters insurance that protect my personal property right? Wrong.

Your homeowners or renters insurance policy does not protect your house from the damage an earthquake causes, even if the damage is indirect. Earthquake insurance can save you thousands of dollars that you would otherwise have to pay out-of-pocket.

As a Californian, you are at a higher risk of being affected by earthquakes because of our state’s position on both the Pacific and North American Plates. California is one of the regions of the world most prone to earthquakes, meaning you seriously need to consider earthquake insurance coverage.

You most likely WILL be affected by an earthquake at some point in your life. California generally experiences two to three, large-scale, earthquakes a year of a magnitude of 5.5 or greater and has smaller earthquakes almost on a daily basis. The larger earthquakes are generally at the level where moderate damage to structures can occur.

What does earthquake insurance actually cover?

Earthquake insure pays for repairs to your house and attached structures, such as a garage. Earthquake insurance also covers your personal belongings such as furniture and clothes. In addition to this, it pays for addition living expenses such as hotel bills if you can’t live in your home.

What doesn’t earthquake insurance cover?

Earthquake insurance doesn’t cover fires or floods even if they are byproducts of the earthquake. Fires should be covered under your homeowners insurance and floods will need to be covered by a separate flood insurance. Although earthquake insurance pays for repairs to your garage, it won’t pay for any damages to your car. You need to ensure that you have comprehensive auto insurance to cover any vehicle damage in the event of an earthquake. It also does not provide coverage against sinkholes, cavities in the ground caused by water erosion that can be a dangerous byproduct of earthquakes. Some states require insurers to offer sinkhole insurance, but in other cases, you can typically add it to you homeowners insurance policy or buy separate coverage.

Why should I consider purchasing earthquake insurance?

  • Your current homeowners or renters insurance policy probably does NOT cover everything.
    Your policy most likely does not cover structural damages and broken personal property so you will need to purchase additional coverage to avoid paying extremely high costs for repairs and replacement.
  • Your home may be located on or near a fault line. 
    If your home is located on or near a fault line, you are at higher risk of being affected by an earthquake and definitely should invest in earthquake insurance. You can check out the fault line and the earthquake risks of where you live to see if you are at a higher risk of being affected.
  • Federal and state governments can only help so much.
    If the President officially declares a disaster, the Federal Emergency Management Agency (FEMA) will help in an evacuation or recovery effort. This may also provide access to disaster aid funds, however, there are no guarantees that you’ll be eligible and this money is often difficult to get.
  • There will 100% sure be more earthquakes in the future.
    It is certain that California will continue to have earthquakes in the future. In fact, according to the California Earthquake Authority there is a 99% chance that there will be an earthquake with a magnitude of 6.7 of greater within the next 30 years. Because earthquakes are a common occurrence and you can expect large earthquakes in the future, it is best to protect your property by purchasing earthquake insurance.

 

Contributor: Smruthi Sriram
Sources: Mercury Insurance, Reference, Nerd Wallet