Avoid Financial Disaster Caused by Earthquake
SEPTEMBER 6, 2022
Earthquakes are increasing in frequency and severity around the world. Data compiled by the U.S. government’s National Oceanic and Atmospheric Administration shows the number of earthquakes per year has varied significantly, but the trend shows increasing frequency.
In 2021, there were three earthquakes with a magnitude over 8.0 — the highest number of this magnitude since 2007. Although earthquakes are unpredictable, proper planning is key to both physical and financial survival. Following are benefits of earthquake insurance and risk management strategies to mitigate damage from an earthquake.
Are You at Risk for an Earthquake?
Forty-two states are at risk for earthquakes. Sixteen of these states have seen an earthquake with a magnitude of 6.0 or greater.
States With Highest Risk for Earthquakes
- South Carolina
Is Earthquake Insurance Included With a Homeowners Policy?
Homeowners, condo and renters insurance protects your home and personal property from everyday exposures like fire, lightning, theft and others. Earthquake damage is usually excluded from these policies. To protect against the risk of earthquake, you need to purchase a separate earthquake policy.
What Does Earthquake Insurance Cover?
Earthquake insurance covers your home. You may purchase personal property coverage to cover your belongings in the home. The personal property reimbursement may be actual cash value (depreciation included) or replacement cost (replace old items with new).
Loss of use is also available for purchase. If your home becomes uninhabitable due to an earthquake, loss of use coverage will reimburse you for out-of-pocket expenses incurred while repairs take place.
Why Are Earthquake Deductibles So High?
Earthquake deductibles are based on the dwelling limit of your home. These deductibles usually range from 15% to 20% of the dwelling limit. Homes closer to an active fault line have higher deductibles.
What Does Earthquake Insurance Cost?
The average cost of an earthquake policy in the U.S. is $800 per year. The price of the policy depends on your coverage limits, deductibles and other factors including:
- Zip code
- Age of home
- Number of stories
- Distance to fault lines
- Foundation materials
- The material with which your home is constructed
- Rebuild cost of your home
California residents may use the California Earthquake Authority’s (CEA’s) premium calculator to obtain an estimated premium for an earthquake policy.
Why Didn’t My Bank Require Earthquake Insurance?
Banks do not require earthquake insurance even if the home is in a high-risk area. If you have a mortgage on the home and the home is destroyed by an earthquake, mortgage payments continue to remain due. It is imperative to purchase earthquake insurance before an earthquake strikes. Insurers stop selling earthquake policies for several months after an earthquake strikes.
In California, the law requires homeowners insurance companies to offer earthquake coverage every other year. Homeowners are not required to accept the earthquake insurance offering. Sadly, only 13% of Californians have earthquake insurance. According to the CEA’s CEO Glenn Pomeroy, most people mistakenly believe they are not at risk.
What Can I Do to Minimize Earthquake Damage to My Home?
To minimize damage to your home, consider retrofitting. Retrofitting strengthens your home against earthquakes. If you own an older home, it was built to withstand strong front-to-back motion from earthquakes. These homes are weaker when it comes to lateral shaking quakes. Retrofitting is therefore imperative for older homes.
Other areas where retrofitting can add protections:
- Anchor mudsill to foundation — Homes can slide across the foundation during an earthquake. Walls become weakened and utility lines rupture. Anchors help to secure your home to the foundation and prevent slippage.
- Brace cripple walls — Cripple walls are short walls on the foundation that support the floor and exterior walls. Cripple walls should be reinforced for side-to-side and front-to-back forces.
- Replace brick foundation — Brick foundations crumble when under the stress of an earthquake. Concrete foundations are the safest option.
Nationwide, retrofitting estimates are $3,000 to $7,000 on average. Homes on the West Coast are more expensive to retrofit due to the increased need of protection. Larger or older homes also have increased retrofitting costs. Grant programs are available to offset out of pocket expenses.
How USI Can Help
Your home is one of your biggest investments. USI Insurance Services has comprised a checklist for planning before, during and after an earthquake. Our team is available to walk you through the various types of earthquake insurance policies and provide you with risk management strategies to maximize asset protection.
Contact us at firstname.lastname@example.org for assistance.
Are Earthquakes Becoming More Frequent? — livemint.com
The Truth About Earthquake Insurance: Is Earthquake Insurance Really Worth It? — lemonade.com
Earthquake Insurance for Homeowners — Insurance Information Institute
Earthquake Insurance, Explained — ValuePenguin
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