Earthquake Insurance, do I need this coverage?

Earthquake Insurance, do I need this coverage?

June 04, 2019

Although we don’t hear many questions about earthquake insurance in states like Colorado or Wyoming, we hear questions regarding the coverage frequently in states like California. Most consumers assume that damage to their homes from earthquakes are automatically covered, unfortunately, this is not the case.

Almost all homeowner’s insurance policies exclude any type of damage to your home directly caused by an earthquake, however, there are a few exceptions to this. One example would be if an earthquake damaged your home and caused a fire to break out at your home further damaging the structure, insurance would pay for the fire damage that resulted from the earthquake. For the sake of this post we will keep it simple and move forward with the idea that earthquake damage isn’t covered.

In states like California having earthquake insurance is imperative if you own a home, however, the high cost keeps most consumers from purchasing the coverage. Earthquake coverage in a state like California can range from $800 a year to $30,000 a year or more. Earthquake insurance cost is based off several factors including: age of home, size of home, and location of home. A location with a higher frequency of earthquakes is going to pay more than a location that might see an earthquake every 20 years. The other downside related to many earthquake insurance plans is that deductibles are usually kept fairly high. So in minor earthquake the insured would more than likely pay for all damage out of pocket and never see a dime from the insurance company. Most earthquake insurance plans are for catastrophic earthquakes, which we (thank goodness) don’t see very often.

A very common question we hear is why doesn’t everyone in high risk states have earthquake insurance? The answer is simple, it’s not required. Earthquake insurance is a voluntary coverage in the United States. Due to the cost and variable factors related to the earthquake insurance pricing we find that most people would prefer to take the risk of not having earthquake insurance than pay high premiums for an event that may never effect their home.

It’s a hard balance to assess. While we encourage everyone in high earthquake risk areas to purchase earthquake insurance, we also know that cost can be a huge barrier. Luckily with the ever evolving insurance market more carriers are developing policies that can be tailored to fit individuals instead of only offering one policy meant to serve a wide variety of home types. We would recommend that all consumers in high risk areas contact their agent and look at the options available to them. Make sure you have all the information to make the best and most informed decision for your home and family.