Why Your Home Insurance Should Cover Earthquake Damage

Many Americans do not have earthquake coverage in their home insurance policies.

Even in the state of California where an earthquake in 1994 killed 57 persons and destroyed property and infrastructure worth $20 billion, only around 12 percent of all homeowners have earthquake coverage, according to data from the California Earthquake Authority.

Some homeowners also assume that earthquake coverage is automatically included in their home insurance policies, so they do not buy earthquake insurance. Home insurance, rental insurance and condo insurance do not cover losses or damages from an earthquake. Earthquake coverage is purchased as an endorsement to the basic homeowners insurance policy or as a separate home insurance policy.

The number of home insurance policies with earthquake coverage is also declining because some consumer groups have been complaining that earthquake policies have become too expensive.

A report from the U.S. Geological Survey said it is 70-percent probable that earthquakes with magnitudes of 6.7 or higher will hit the Bay Area in the next 3 decades.

Based on studies by the Charleston Southern University’s Earthquake Education Center, there is a 40 percent to 60 percent probability that a major earthquake will occur in the eastern U.S. in the next 2 decades.

The New Madrid earthquake fault, which passes through Tennessee, Missouri, Kentucky and Arkansas, has also been an increasing concern to insurance companies. The Insurance Information Institute said there is a 40 percent to 63 percent probability a major earthquake will hit the region in less than 2 decades.

W.R. Padgett, head of the Central U.S. Earthquake Consortium, said states in the region need to prepare as a region because the magnitude of a major New Madrid earthquake cannot be contained by only one state.

So what can homeowners do to prepare for a major earthquake? One practical preparation is to buy earthquake coverage in addition to one’s basic home insurance policy. The amount of the earthquake coverage must be equal to the cost of replacing one’s home and belongings if destroyed by an earthquake.

In California, homeowners can buy earthquake insurance from the CEA, which is a private-public entity that provides earthquake insurance to homeowners, condo owners and renters in the state.

The cost of earthquake insurance varies according to the age of the house, the location of the house and the scale of the state in terms of earthquake probability.

Just remember, the cost of your earthquake insurance and your home insurance is negligible compared to the protection you will get in case something happens.