We all know that California is prone to earthquakes. There have been several high-magnitude quakes in recent history, and homeowners should consider having earthquake insurance. Some recent earthquakes include the Northridge Earthquake in 1994, which reached a magnitude of 6.7, and the Landers Earthquake in 1992, with a magnitude of 7.2. However, a surprisingly low number of Californias actually have earthquake insurance policies to protect their home.
According to the California Dept. Of Insurance, less than 11% of homeowners, and less than 6% of renters have earthquake insurance. When the Northridge quake hit in 1994, 33% of homeowners had insurance protection. There are several reasons why Californians are not getting quake insurance anymore. Some include the increase in prices in the home market, higher mortgages than before, and the fact that there hasn’t been another earthquake as destructive as the Northridge one ever since.
The longest it takes, the better, as the aftermath was devastating, but we should think of the worst-case scenario and prepare in advance. Before deciding to get earthquake insurance or not, we need to consider three key aspects. It is important to know how it works, what it covers, and then decide if we really need it or not.
How Does Earthquake Insurance Work?
Unlike popular belief, earthquake insurance is not part of our home insurance, so this specialized coverage needs to be purchased separately. This type of insurance helps you protect your house and belongings in case of damage or loss. They should also help you cover living expenses should you need to find temporary accommodations.
The deductibles and premiums you would have to cover can vary greatly from one insurance provider to another. However, the limit of your deductible is related to the total value of your property. In most cases, your earthquake insurance deductible will be somewhere around 10% and 15% of the insured structure. In the case of personal possessions coverage, earthquake insurance policies limits come to a dollar amount, instead of a percentage.
What Does Earthquake Insurance Cover?
Just like we mentioned above, an earthquake insurance policy will cover three types of expenses. They will cover the damage to your home, your personal property, and your temporary living expenses.
You will get coverage in the event that your house suffers from damage to its structure. Some examples can be cracks in the walls or the ceiling, or on the foundation. It will also cover total loss expenses, such as the ceiling, a wall, or the whole structure falling. With insurance coverage, they will cover a percentage of the expenses, and the rest will come out of your pocket. Since earthquake home damages can be devastating, the expenses will be too, but having the policy to back you up will make the process easier.
For personal property, insurance companies will set a limit amount they will cover. An earthquake can damage or destroy our furniture, electronics, and other types of items. However, the amount of property damage tends to be less than, say, during a fire. In this case, we can lose everything.
You can also get coverage if you need a temporary living space while you repair or rebuild your house. Other expenses that fall under this category can be moving, storing possessions, laundry, and even temporary phone lines should you need one.
Do I Really Need Earthquake Insurance?
If we live in California or states prone to temblors, earthquake insurance might be a thoughtful decision. Even though the great majority of California residents do not have this type of coverage, being prepared for the worst-case scenario is always a good idea.
The California Earthquake Authority (CEA) noticed a significant increase in interest in earthquake protection after Mexico was hit by a serious earthquake last September 19th. During this earthquake, more than 300 people lost their lives, and thousands of dollars were lost in damages.
Since there hasn’t been an earthquake in California as devastating during the last 20 years, we forget about earthquake insurance. However, scientists say that a magnitude 8.2 mega earthquake sometime in the future might hit California. Such a disaster could be as deadly as Hurricane Katrina.
At the end of the day, it is up to you to decide if earthquake insurance would be a smart financial move for you or not.