You just bought a house and a standard homeowner’s insurance to go along with it. However, an earthquake strikes and your new home is now in need of repair. You called your insurance company only to find out that your basic homeowner’s insurance doesn’t cover the damage.
I am sure a lot of you would want to understand how earthquake insurance works and how it can be of help to you. This article will detail the in’s and out’s of earthquake insurance and how you can benefit from it.
Table of Contents
- 1 Does My Standard Homeowners Insurance Include Earthquake Coverage?
- 2 Who Needs Earthquake Insurance?
- 3 Earthquake Insurance Coverage
- 4 Earthquake Risks Depend On Location
Does My Standard Homeowners Insurance Include Earthquake Coverage?
As stated in the introduction, the answer would most likely be a NO. Insurance policies, regardless if it is homeowners or business insurance, wouldn’t cover for damages caused by an earthquake. Separate insurance coverage or policy is required in order to be eligible for earthquake insurance. You can also choose to ask for an endorsement to include earthquake insurance in your insurance policy.
Who Needs Earthquake Insurance?
People that reside near fault lines are certainly in need of earthquake insurance. However, due to human activities, some areas are becoming prone to the movement of the ground. It is also important to know the cost of an insurance policy and the minimum deductible to help in determining if earthquake insurance is costlier than shouldering the rebuilding costs.
In order to find out if this is the case, you need to examine your financial capacity and your ability to rebuild your home in the event of an earthquake. It is essential to know that while standard homeowners insurance will not cover for earthquake damages, a fire caused by an earthquake is covered by your basic insurance policy.
This means that even without separate earthquake insurance, you can still ask your insurance company to pay for the secondary damages that are directly related to the earthquake. For example, if an earthquake occurs and the shaking of the ground causes your home to catch on fire, you can file for a claim for the fire damages.
Earthquake Insurance Coverage
Since earthquake insurance is different from your standard homeowner’s insurance, there are some major differences to the coverage. In order to delve deeper into this issue, we list down some factors that may affect the premium price of an insurance policy.
Homes with Higher Risks during Earthquake
Multi-story or Tall Homes
Homes with multiple floors at a higher risk for damage when there is an earthquake. Taller homes may topple when the ground is moving. This is why taller homes require a higher premium when paying for earthquake insurance. Homes with
Nowadays, more homes are being designed to become earthquake-proof. This is why newer homes are easier to get approved for earthquake insurance policies. Older homes may have more difficulty to ensure as they hold a higher risk of damage during an earthquake. In case of a disaster, older homes are more prone to incurring severe harm compared to new homes. This is also the reason why older homes have a higher insurance premium. Others even argue that rebuilding a home may be cheaper than insuring an older home.
Compared to homes with a wooden frame, brick homes are more expensive to insure. This is because wood frame structures are able to resist damage in case of an earthquake. It is attributed to the fact that wood is more elastic than most materials. This is the reason why a home with a stone or brick base is more prone to damage during strong tremors. Apart from wood, homes that use sandy soil as a base also enjoy a lower premium for their insurance coverage.
Earthquake Insurance Policy Coverage
The structure of a home is compromised when the ground begins to shake. Strong earthquakes occur without warning and it leaves a trail of damage to homes and buildings everywhere. When a home is covered with earthquake insurance, the policy covers the damages that occur to the building. However, it is important to check the policy if the additional structures around the property are also covered. Other insurance companies may provide coverage for the yard or garage, but some insurance policies only pay for the damage caused to the actual home.
During strong tremors, our personal property will lose their footing. This will lead them to fall, which leads to the destruction of several items. With your earthquake insurance, your items can be eligible for replacement or repair cost. Some high-value items are insured separately or the insured can avail of an umbrella policy. It is important to have an inventory of all your items to make sure that they are accounted for during an earthquake.
Temporary Living Expenses
Strong tremors can leave several people with high-risk homes. Some people leave their homes to ensure their safety, especially if the structural integrity of a home is compromised. The temporary living expense coverage of a home will shoulder for the direct costs of moving into a temporary living facility. The insurance company will cover for living expenses while your home is being rebuilt.
Earthquake Risks Depend On Location
Some states are at more risk compared to others. According to a 2014 report of the US Geological Survey, Alaska, Arkansas, California, Hawaii, Idaho, Illinois, Kentucky, Missouri, Montana, Nevada, Oregon, South Carolina, Tennessee, Utah, Washington, and Wyoming are more at risk for an earthquake than other states. This is why it is recommended that homeowners in these states purchase earthquake insurance for their protection. However, you shouldn’t be surprised if the cost of earthquake insurance is significantly higher in these states. The premium may be even higher if your home is located along a fault line
In a span of 30 years from 1974 to 2003, the states of South Carolina, South Dakota, Virginia, Nebraska, Ohio, Georgia, and Indiana have experienced 10 or less strong earthquakes. This puts them at a lower risk compared to other states. Hence, their earthquake insurance premium is considerably lower compared to other US states.